Non-compete agreement template

Non-compete agreements serve as a protective measure for companies to safeguard their business interests, intellectual property, and trade secrets. 

But what exactly are non-compete agreements, who needs them and how can you draft one effectively? Let's delve in.

What is a non-compete agreement?

A non-compete agreement, often referred to simply as a "non-compete," is a legal contract between an employer and an employee. The agreement stipulates that the employee will not engage in any business that competes with the employer for a specified duration and within a certain geographical area after leaving the company.

These agreements are designed to prevent employees from leveraging proprietary knowledge or trade secrets to benefit a competitor or start a competing business. 

They are especially common in industries where sensitive information is a key competitive advantage, such as technology, finance and pharmaceuticals.

While non-compete agreements can be crucial for businesses to protect their interests, they must be reasonable in scope and duration to be enforceable. Overly restrictive non-competes can be challenged in court and may be deemed invalid.

Unilateral vs bilateral non-compete agreements

A unilateral non-compete agreement involves one party (typically the employee) agreeing not to compete with the other party (the employer). 

On the other hand, a bilateral non-compete agreement involves both parties agreeing not to compete with each other. The latter is less common and is usually seen in partnerships or joint ventures.

When should you use a non-compete agreement?

• Hiring key personnel. When bringing onboard executives, managers, or other key personnel privy to strategic company information, a non-compete can safeguard against them leaving and immediately joining or starting a rival business.
• Engaging with consultants. Freelancers or consultants who have access to sensitive company data should be bound by a non-compete to prevent them from using that information for the benefit of competitors.
• Business sales: If selling a business, the buyer may require the seller to sign a non-compete to prevent them from immediately starting a similar business that would compete with the acquired one.
• Forming a partnership or joint venture: To ensure that all parties involved are committed to the venture's success and won't engage in competing activities.

Key elements of a non-compete agreement

• Parties involved. Clearly define the employer and employee or the parties entering into the agreement.
• Duration. Specify the time period during which the employee is prohibited from engaging in competing activities.
• Geographical scope. Define the geographical area where the non-compete is applicable.
• Definition of competition. Clearly outline what constitutes "competing" activities.
• Compensation. Some jurisdictions require the employee to be compensated for agreeing to a non-compete.
• Consequences of breach. Detail the repercussions if the agreement is violated.
• Governing law. Specify the jurisdiction that will govern the agreement in case of disputes.

Challenges with non-compete agreements

Enforceability issues arise when non-competes are overly broad or unreasonable, as courts can deem them unenforceable. 

In addition, non-compete agreements can occasionally strain the relationship between employers and employees, especially when individuals perceive them as barriers to their career progression. 

For companies operating across multiple states or internationally, the variation in non-compete laws by jurisdiction presents challenges. 

Automating non-compete agreements

Modern businesses are leveraging automation to streamline the creation and management of non-compete agreements. 

Platforms like Juro can help businesses generate non-compete agreements efficiently, ensuring legal compliance and reducing manual work.

Benefits of automating non-compete agreements

1. Standardization. This ensures that all non-compete agreements adhere to a standard template, reducing risks.
2. Efficiency. Speed up the process of drafting, reviewing, and signing non-compete agreements.
3. Centralized storage. Store all agreements in one repository for easy access and management.
4. Improved compliance. Ensure that all non-competes are compliant with the latest legal regulations.

Automate your non-compete template with Juro

If you're looking for a scalable way to create, negotiate, sign and share non-compete agreements, from easy-to-set-up templates, our team of specialists at Juro can help you explore the benefits of automation. 

Hit the button below to find out more.