Noncompete Agreements

A noncompete agreement is either a separate agreement or a clause in an employment contract that prohibits an employee from working in a related business in your area for a certain length of time. Noncompete agreements are used to prevent an employee from using your business's confidential information.

You can make the signing of a noncompete agreement part of your terms of employment without creating an employment contract. It's important not to make it seem that by signing the noncompete agreement, an employee can expect to be employed forever. A noncompete agreement applies only to one specific aspect of an employment relationship the confidential information related to your business.

Business Tools

The Business Tools area contains some sample language that you might want to consider incorporating into a noncompete agreement.

The challenge lies in deciding if noncompete agreements are right for your business and which employees should sign them.

The bad news. While some consider noncompete agreements an effective way to protect the business's time, money, and resources, such agreements are difficult to enforce and are not looked favorably upon by many states' courts because they restrict an individual's choice of employment. Check out our tips for making noncompete agreements enforceable.

Who should sign noncompete agreements? Not all your employees may need to sign noncompete agreements. The janitor, for example, may not have access to any sensitive information, so you shouldn't ask that employee to sign one.

Employees who should be asked to sign noncompete/nondisclosure agreements are:

Enforcing noncompete agreements. Noncompete agreements are hard to enforce. Many courts perceive them as attempts to limit an individual's ability to obtain employment. For that reason, most courts will insist that a noncompete agreement be reasonably limited in geographic scope and duration. To ensure that your noncompete clause or agreement is enforceable: