Non-compete agreement

Restrict a departing employee from competing for a stated time in a stated territory, in exchange for stated consideration. Written to the limits courts enforce, with initials on the restriction itself.

An agreement in which an employee promises not to work for or start a competing business, within a defined territory and for a defined period after leaving, in exchange for employment, a payment or a promotion. Signed by the employer and the employee, who also initials the restriction.

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What it covers

When to use it

What it does not do

Signing, witnesses and delivery

The agreement

Non-Compete Agreement

This Non-Compete Agreement (the "Agreement") is made effective [Effective date] between [Company legal name] (the "Company") and [Employee full legal name], residing at [Employee home address] (the "Employee"). The Company is engaged in the business of [Description of the Company’s business] (the "Business"). The Employee is employed by the Company as [Employee job title] and in that role will receive the Company’s trade secrets and confidential information and will develop relationships with the Company’s customers on the Company’s behalf. The Company and the Employee are each a "Party".

1. Definitions

"Competing Business" means any person or entity, including the Employee acting alone, that is engaged in or actively preparing to engage in the Business, or any part of it, in the Territory. The following are Competing Businesses for purposes of this Agreement: [Named competitors (or "Any Competing Business")].

"Restricted Period" means the period of the Employee’s employment with the Company and [Duration after employment ends (months)] months after the date the employment ends for any reason, whether by the Employee or the Company, with or without cause.

"Territory" means [Restricted territory], being the area in which the Employee performs services for the Company or has responsibility for customers.

"Confidential Information" and "Trade Secrets" have the meanings given in the Employee’s confidentiality agreement with the Company or, if there is none, mean the Company’s non-public business, technical, customer and financial information.

2. Covenant Not to Compete

During the Restricted Period, the Employee shall not, within the Territory, directly or indirectly, whether as an employee, owner, partner, member, consultant, contractor, agent or otherwise, perform or supervise the following activities for a Competing Business: [Restricted activities].

The Employee acknowledges that this restriction is limited to the type of work the Employee performs for the Company, the geographic area in which the Employee performs it, and a period no longer than needed for the Company to protect its Trade Secrets, Confidential Information and customer goodwill; that the Employee has read and understood it; that the Employee has had the opportunity to consult a lawyer before signing; and that the Employee can earn a living during the Restricted Period without breaching it. THE PARTIES SHALL INITIAL THIS SECTION TO CONFIRM THEIR AGREEMENT TO THE RESTRICTION.

3. What Is Not Restricted

Nothing in this Agreement prevents the Employee from: (a) owning up to two percent (2%) of the publicly traded securities of any company; (b) working for a Competing Business in a role, division or product line that is not engaged in the Business, provided the Employee does not perform the restricted activities and gives the Company written notice of the position; (c) working outside the Territory; (d) working in any state whose law makes this covenant unenforceable against the Employee, in which case Section 2 shall not apply while the Employee lives and works there, and the remainder of this Agreement shall continue; or (e) any activity the Company approves in writing in advance. This Agreement does not restrict the Employee from accepting employment after the Restricted Period ends.

4. Consideration

The Employee enters into this Agreement in exchange for the following consideration, which the Employee acknowledges is adequate and would not be received but for this Agreement: [Consideration for the restriction]. Detail: [Consideration detail (amount, raise or "Not applicable")]. If the consideration is a payment, the Company shall make it within thirty (30) days after both Parties sign, and if the Company fails to do so this Agreement shall be void. If the consideration is initial employment, the Employee acknowledges that this Agreement was provided to the Employee before the Employee accepted the offer of employment.

5. Reasonableness; Protectable Interests

The Employee acknowledges that the Company has invested substantial resources in developing its Trade Secrets, Confidential Information and customer relationships; that the Employee’s services are of a special character and that the Employee will be entrusted with that information and those relationships; and that the Company would suffer irreparable harm if the Employee used them for a Competing Business during the Restricted Period. The Employee agrees that the restrictions in Section 2 are reasonable in duration, geographic area and scope of activity and are no greater than necessary to protect those interests.

6. Notice to Future Employers; Tolling

During the Restricted Period, the Employee shall provide a copy of Section 1 through Section 3 of this Agreement to any prospective employer or business partner in the Business before accepting an engagement, and shall notify the Company in writing of the identity of any new employer within five (5) business days after accepting an offer. The Company may also provide a copy of this Agreement to any such person. If the Employee breaches Section 2, the Restricted Period shall be extended by the length of the breach, to the extent permitted by the law of the governing state, so that the Company receives the full benefit of the period bargained for.

7. Remedies

The Employee agrees that a breach or threatened breach of Section 2 would cause the Company irreparable harm for which money damages would be inadequate, and that the Company shall be entitled to a temporary restraining order and preliminary and permanent injunctive relief, without the necessity of proving actual damages or posting a bond, in addition to any other remedy available at law or in equity. If the Employee materially breaches Section 2, the Employee shall also forfeit and repay any consideration paid under Section 4 for the restriction, and the Company shall be entitled to recover its reasonable attorney fees and costs incurred in enforcing this Agreement. If the Company brings an enforcement action and does not prevail, the Employee shall be entitled to recover reasonable attorney fees and costs where the law of the governing state so provides.

8. Modification by a Court

If a court of competent jurisdiction determines that any restriction in Section 2 is unenforceable as written because it is too broad in duration, geographic area or scope, the Parties intend that the court modify the restriction to the extent necessary to make it enforceable and enforce it as modified, rather than declare it void, to the extent the law of the governing state permits. If that law does not permit modification, the unenforceable restriction shall be severed and the remainder of this Agreement shall continue.

9. Relationship to Other Agreements; At-Will Employment

This Agreement supplements, and does not replace, any confidentiality, invention assignment or non-solicitation agreement between the Parties, each of which remains in full effect. Nothing in this Agreement changes the at-will nature of the Employee’s employment or creates an obligation on the Company to employ the Employee for any period. The Employee’s obligations under this Agreement survive the end of employment regardless of the reason for it.

10. Governing Law and Forum

This Agreement is governed by the laws of the State of [Governing law (state)], without regard to its conflict-of-laws rules, and each Party consents to the exclusive jurisdiction of the state and federal courts located in that state for any dispute arising out of this Agreement, except that the Company may seek injunctive relief in any court with jurisdiction over the Employee. If the Employee primarily lives and works in a state whose law requires that its own law govern or its own courts hear a dispute over this Agreement, that law and those courts shall apply to that extent.

11. General

This Agreement is the entire agreement between the Parties about non-competition and supersedes any prior non-compete provision between them. It may be amended only in a writing signed by both Parties, and no waiver of a breach is a waiver of any later breach. If any provision is held unenforceable, the remainder continues in effect, subject to Section 8. The Company may assign this Agreement to a successor to its Business; the Employee may not assign it. This Agreement may be signed electronically and in counterparts, and the electronic execution record, timestamps and document fingerprints kept by the signing platform are conclusive evidence of its execution and of the initials in Section 2.

Signatures

Company · Employee

Non-Compete Agreement FAQ

Are non-compete agreements enforceable?

It depends entirely on the state and on how narrow the restriction is. They are void for employees in California, Minnesota, Oklahoma and North Dakota, restricted by income thresholds and notice rules in a dozen more, and enforced in the rest only when the duration, territory and scope are no broader than necessary to protect trade secrets, confidential information or customer goodwill. A one-year restriction limited to the employee’s actual role and the territory they actually worked is usually the outer edge of what a court will enforce. The federal FTC rule that would have banned most non-competes was blocked in court; check its current status.

What is the FTC non-compete rule?

In April 2024 the Federal Trade Commission adopted a rule declaring most employee non-competes an unfair method of competition and requiring employers to notify workers that existing ones would not be enforced. A federal court in Texas set the rule aside nationwide before it took effect, and the agency’s position has continued to develop since. Before you send this agreement, check whether any federal rule is in force; even without one, the FTC has pursued enforcement actions against employers with overbroad covenants.

How long can a non-compete last?

Six to twelve months is the range most courts accept for an ordinary employee; two years is sometimes upheld for senior executives with deep customer relationships; longer is rarely enforced outside the sale of a business. Some states set a statutory maximum: one year in Massachusetts, Oregon and Washington (eighteen months in some cases), and Colorado and Illinois tie enforceability to earnings. The agreement lets you set the number of months; shorter is more enforceable.

What counts as adequate consideration?

A new job is enough consideration in most states, but only if the agreement is signed at or before the start of employment. For an existing employee, continued employment alone is not enough in a growing number of states (including Illinois, Minnesota before its ban, Pennsylvania, and others); you need something new: a raise, a bonus, a promotion or a payment. The agreement has a field to state what the employee receives and a field for any amount paid.

Can I fill in the territory and duration and let the employee fill in the rest?

Yes. Any blank you leave becomes a field the employee completes when they open the link, and you see it before you countersign. The employer should fill in the restricted activities, territory, duration and consideration, because those are the terms a court will scrutinize; leave the employee’s legal name, home address and email for the employee. If you are negotiating the list of restricted competitors, leave that field blank and let the employee propose it.

Does the employee have to initial the restriction?

No state requires initials on a non-compete, but courts weigh whether the employee actually knew what they were agreeing to, and a separately initialled restriction answers that question. It also stops the later argument that the restriction was buried in a longer document. The initials boxes for both parties are placed after Section 2.

What if the employee moves to California after signing?

California will not enforce the non-compete against someone who lives and works there, whatever governing-law clause the agreement contains, and since 2024 California law lets the employee sue for a declaration that it is void. Section 3 of this agreement says the restriction does not apply where it would be unenforceable, which keeps the rest of the agreement (and the confidentiality obligations) intact.

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This template is general information, not legal advice. Laws differ by state; review anything important with a lawyer.

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