Non-compete agreements are frequently-used business contracts, both in employer/employe situations and in agreements with the seller of a business. Non-compete agreements are discussed more in depth in this article.
1. What is a Non-compete Agreement?
A non-compete agreement, sometimes called an agreement not to compete, is an agreement (either separate or part of a contrt) in which one party agrees not to compete with the other party for a period of time, within a specific area, and in a specific type of business. Non-compete agreements are most common in employment agreements and in business sales.
2. What are the Types of Non-compete Agreements?
Non-compete agreements are found primarily in two situations:
- With an employer and employee, in which the employer wants to be protected against the employee leaving and setting up a competing operation
- With a business sale, in which the new buyer wants to be protected against the seller setting up a competing operation and taking the former customers
Considerations in non-competes and questions about non-competes are detailed in this article.
3. Can a Non-compete Agreement be Contested?
As with other types of contracts and agreements, a non-compete agreemenan be brought to court if it is determined to be a valid agreement. But it may not be valid in a specific state, and it may take many years and a lot of money and lost revenue to take a non-compete agreement to court.
4. U.S. States and Non-compete Agreements
Each U.S. state has a difference stance on non-compete agreements. Some states, like California, do not allow non-competes at all, believing that they are too restrictive to trade. Many other states will allow non-competes as long as they are "reasonable" - that is, as long as they do not unfairly restrict someone from competing in a business area. This article discusses the various state statutes and court cases relating to non-competes.
5. Non-compete Agreement vs. Non-soliciation vs. Non-disclosure
Non-compete agreements restrict competition; non-solicitation agreements restrict soliciting of employees and customers, and non-disclosure agreements restrict former employees or executives from revealing proprietary company information, trade secrets, or other company information.
