Chapter 2: Contracts that Define Employment Relationships
Part 1: Examples of Employment Contracts
E: Non-Compete Agreement
This agreement can either be a standalone contract or a provision added to an employee contract. Non-compete contracts exist between you and your employee, and they require that your employee not use what they learned while working for you against you. Non-compete agreements usually stipulate that an employee won't work for competitors, steal your current clients, or compete with you for some period of time once they leave your company.
Non-compete contracts can be difficult to enforce if they're unreasonable. Here are some key considerations to keep in mind:
- Time Frame. Period of time the agreement can be enforced for after the employee leaves. A year is usually considered reasonable.
- Geographic Area. If your agreement covers too wide an area (e.g., the whole country), it can very easily be challenged if the employee takes their case to court.
- Types of Business Engagement. The viability of your contract depends on whether or not its provisions still allow an employee to earn a living with limited adverse effects on your business. If you prohibit a former employee from engaging in too many types of business, a court will likely deem the agreement unenforceable.
Check out SME Toolkit's sample non-compete agreement to see an example.
Next: Part 1F: Examples of Employment Contracts: Work for Hire Agreement