Are former employees bound to protect your trade secrets? And what if someone who once worked for you stole some of your top clients? These are only some of the legal concerns or fears addressed in a typical non-compete agreement.
As the name suggests, a Non-Compete agreement is a binding contract where employees agree not to compete with the employer even after the employment period is over. The obligation not to compete is usually only valid for a specific period or geographical zone.
In the business world, competing behavior manifests in many different ways, from divulging trade secrets to working for your direct competitors. This means, if you want to protect your company’s standing in the market, you might need to place a legal restriction on certain actions of your employees even after they are gone. More often than not, these actions involve the use of privileged information they had access to while working for you, such as:
- Customer or client lists
- Algorithms or source codes (for tech companies)
- Pricing structures
- Revenue breakdowns or future investment plans
- Sales or manufacturing techniques
Our Non-Compete Agreement template is based on most standard US laws and allows you to decide the extent of the non-competition, its term, the region in which it is applicable, and any exceptions or exclusions to the obligation.
Now, let’s navigate our way through our pre-made, fillable template, which you can use to save up hours in research, drafting, and formatting work!
How Our Template Works
Spread out over 9 pages, our template comprehensively covers most typical clauses included in non-compete agreements. However, you can always rename clauses, delete or edit them, or rearrange the order they are in using an editable version of the file. We use checkboxes throughout our contract so you can select the correct option as it applies to your situation.
Identify the parties
After you note down the date when your non-compete is signed, your first step is to identify the parties to the agreement so there is no awkwardness or confusion later on.
For both the employer and employee, add their full legal names before identifying a postal address. For employers, you will also need to specify what specific industry they operate in, say, textile or software development and so on.
How Long Should a Non-Compete Last?
It’s important to define a duration for which a non-compete agreement shall be valid & enforceable. Most non-competes around the world are valid for up to 6 months or a year. As of early 2025, there is no federal law in the U.S that categorically defines an upper limit for how long an employment-based non-compete agreement can stay valid. In fact, over the past decade or so, the general momentum (at the federal level) has been directed against non-compete agreements (or clauses) as they limit worker mobility & stifle economic growth.
Down at the state level, however, there may be specific statutory rules limiting the duration of non-competes. For example, the state of Oregon has a 12-month limit, yet in other states like Florida, New York and Georgia – the reasonable limit can be longer, say, anywhere from 6 months to up to 2 years! (To learn more about individual state laws & practices in this area, feel free to skim through this article!)
Note that in states where no statutory limit is provided, it’s up to the courts to decide what’s a reasonable duration in light of the specific circumstances of each case. What’s reasonable will ultimately depend on your industry or business context, so make sure you give this section a good think before locking in the commencement and expiration dates in our template.
Agreement term
For commencement dates, we give you the option to either select a calendar date or make commencement subject to the occurrence of a specific event. We also add a third open option to define when the agreement term starts.
For expiration dates, you can either choose to conclude the agreement on a specific date, or expire the agreement after a certain number of months (to be filled by you) after a specific event, which you must name in the space provided. We also add a third open option to define when the term of agreement starts.
Scope of a Non-Compete Agreement
Our next clause is the core of your non-compete agreement. We use broad language to cover future employee actions, where they shall not ‘directly or indirectly, engage in, be associated with, or hold any ownership interest in any business or entity that competes, in whole or in part, with the Employer’.
Use this clause to nail down a geographic zone within which the employee must abide by the agreement. Simply calculate this non-compete zone in light of your business interests: a neighbourhood, city or the whole state? In the blank space provided, specify the mile-wise radius of this physical area you want to protect.
What does the law say?
Now, in case you are wondering what the law says on this, here it goes. At the federal level, there is no specific geographic limitation. In practice, this means courts rely on the ‘reasonableness’ standard to decide if the limit you specify in this clause should be enforced or not.
Both at the federal and state levels, global or nationwide bans are less likely to be enforced than narrow, tailored ones. State courts use different factors to assess whether a non-compete is reasonable and enforceable, such as:
- Does the ban protect the employer’s legitimate business interest only? (Florida, Washington)
- Does the ban match the areas where employees worked in? (Texas)
- Does it only cover client regions? (New York)
What’s a Non-Solicitation Clause?
Moving on, we add a non-solicitation clause (Clause iii), used by companies to stop former employees from reaching out or ‘soliciting’ your clients, customers, or business partners. Our templates give you the option of adding a non-solicitation clause to protect your contractual relationships with:
- Employees: Checking this option will protect you from any attempt to cajole your workers to leave the company and join them instead.
- Business partners: Protects your relationship with existing vendors, contractors, or business associates.
- Or both.
Compensation for Employees
Now, you might be wondering – what is the employee getting out of this legal agreement? That’s exactly where our next clause comes in.
Check the first box if you do not wish to offer any compensation to the employee for not competing. If compensation is being offered, check the second box and use the blank space to specify the exact amount of compensation you are willing to offer to the employee.
Not sure if you are legally obliged to offer compensation to employees beyond the job offer itself? Well, yes and no.
At the federal level, at least, there is no law requiring employees to be paid for complying with the terms of a non-compete. This means the matter is left to the local contract laws of the applicable state you are signing. As it happens, many states do require additional consideration if a non-compete is signed after employment starts.
For example:
- Illinois: Employers must offer a benefit (e.g., raise, bonus).
- Massachusetts: Must pay during the restriction period (sometimes known as garden leave).
- Oregon: Must pay at least 50% of base salary during the restriction period.
- Colorado: Compensation only to highly compensated employees.
- Washington: The Employee must meet a certain income threshold.
The Confidentiality Requirement
Our next clause is a standard confidentiality term. By signing the agreement, employees agree not to share or disclose any proprietary information they have access to during their employment. Our clause identifies some types of information by name (such as business plans or software designs inter alia). However, you can customize the text to suit your company or industry context.
We have added subsection (a) to identify any exceptions to the confidentiality rule. You can replace our default exceptions with ones better suited to your business or industry.
A subsection (b) is added to guide authorized disclosure of information. As per this subsection, before sharing information, the employee must make sure individuals receiving said information are under a confidentiality agreement or legal duty that:
- Makes them keep the information secret,
- Stops them from telling anyone else, and
- Says they can only use the information to help the company, unless the company gives written permission.
Injunctive Relief
Use this section to make sure that the employee agrees that if they break (or even threaten to break) the non-compete rules, it could seriously harm the company in ways that money alone can’t fix, like losing customers or trade secrets.
Because of this, the company reserves the right to go to court to stop the employee from doing anything that violates the agreement. This could be things like blocking them from working for a competitor or sharing confidential information.
Is It Possible for Employees to Buy their Way out of a Non-Compete?
It is quite common for such agreements to have a specific clause that makes it possible for employees to absolve themselves of their legal duties by offering a certain sum of money.
This section gives the parties two options:
- Option 1: The employee can “buy their way out” of the agreement at any time by making a one-time payment (amount to be filled in). Once the employer gets the payment, they’ll give the employee a written document releasing them from all responsibilities under the agreement.
- Option 2: The employee cannot buy a release. They must follow all parts of the agreement no matter what, and there’s no way to get out of it by paying money or offering anything else.
Navigating Disputes
Most non-compete agreements will also specify what happens in case of a conflict between the two parties. To avoid confusion or legal ambiguity later on, it’s best to decide beforehand which laws or dispute resolution mechanisms apply to you.
Clause (x) basically states that if there’s ever a disagreement over the terms of the contract, both parties must follow the laws of a specific state (you’d fill that in, like ‘New York’ or ‘Texas’).
If a party needs to go to court, it has to be in a certain city or area within that state, which you get to specify in our template. Both you (the employer) and the employee agree that those courts have the exclusive authority to handle your case.
The Law on Non-Competes
But as with every legal doctrine, it’s important to strike the right balance between the rights of both parties. In case of the non-compete principle, you have to balance the business interests of the company with the economic rights of workers to wage growth and other career opportunities.
In the U.S., the law on non-competes varies greatly by state. For example, the states of California, Minnesota, North Dakota, and Oklahoma have all banned non-compete agreements for employees, with only limited exceptions. In Nevada, hourly wage workers cannot be made to sign non-competes, while in states like Oregon, they are only legal for employees earning above a certain salary threshold and even then, must be limited in duration and geographic scope.
Sign & Date
As with every written contract, you need the dated signatures of both parties to render it valid and authentic. Signatures help you verify that both parties fully acknowledge the terms laid out in the non-compete agreement.
Before you finalize the contents of this agreement, we strongly advise you to have the final agreement vetted by a registered legal practitioner in your area. Preferably, you should consult a lawyer who is well-versed in the specific practices, protocols, and processes of your industry!
Other names
- Noncompetition agreement
- Noncompete covenant
- Restrictive covenant
- Covenant in restraint of trade
- Promise not to compete
- Contract not to compete
Summary
An Employment Non-Compete Agreement Template is an official agreement or contract used by an HR representative or employer when hiring an employee. Signing this document is essential for protecting the employer’s business, revenue, and competitive opportunities. This form also helps establish a paper trail and an official record of the employee’s duties and responsibilities during and after their employment.
An Employee Non-Compete Agreement includes all necessary clauses that the employee must adhere to during their employment and for a specified period after their employment has ended. These clauses may include, but are not limited to, non-compete agreements, confidentiality or non-disclosure agreements (NDAs), non-solicitation agreements, severability clauses, arbitration and governing law provisions, and intellectual property rights clauses.
Wrap Up
An Employee Non-Compete Agreement template like ours makes sure that all terms are recorded for both the employer and the employee while also maintaining fairness for the employee.
Non-compete agreements are particularly common in the healthcare industry, where nurses, doctors, and technicians are required to sign non-competes to protect patient bases, treatment methods, and medical discoveries from competing hospitals or drug companies.
Note that none-competes are not exclusive to employer-employee relationships. They are also used when selling a business, dissolving a partnership, or hiring a contractor. However, our template only caters to non-competes signed between an employee and a representative of the employer.
