Non compete agreement is an extensively used agreement in the corporate field where competition runs high and the companies are fighting shoulder to shoulder to keep their edge over their competitors.
This type of agreement binds a person or representative temporarily working for a company, to refrain from working against the company or its interest even after the contract between a representative and the company has ended.
Read this detailed article if you have a query related to a non-compete agreement such as where it comes from, what it means, and how it can be applied. The article explains in detail the ins and outs of the non compete agreement and its intricacies as well.
What Is a Non Compete Agreement?
Non compete agreement is an important tool used by the companies to protect their interests against the competition. It is essential for protecting the interests of a company, even when the employee or service provider has completed the terms.
It is basically a pact between a company and a representative where the representative is asked and held liable by law. This guides two parties to not act in a way that is deemed as competitiveness against the company.
Also, it protects the interests of the company from being held in danger by the representative after their term of working with the company is essentially over.
Non compete agreement is used in circumstances after the company and the representative have closed their working contract and their term with it.
In simple words, the representative is asked to refrain from competing against the company after their term of working has come to an end.
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Why Employers Use a Non Compete Agreement?
A non compete agreement was prevalent with the representatives who are essentially temporary workers of a company. The purpose of a non-compete agreement is to stop the employees or representatives from trading trade secrets of the company with its competitors.
A representative or employee is usually assigned certain tasks by the company while dealing with certain services or goods of the company. These tasks could include marketing, sales, or storage of the services or goods offered by the company.
In order to help the representative work better, the representatives are often given additional information about the production, price, and other miscellaneous information about the products of the company.
This information is often sensitive and can be used by the competitors to wrongfully take advantage of leading the market. It can become a usual practice for people to get a higher salary, a notable position.
Or other monetary benefits from a competitor’s company by using the information they gain as a representative of a company. This information is essentially used against the said company by joining a competitor in the future.
In order to stop this trading of information between representatives and the companies, such a non compete agreement is put into place. Hence, the agreement works to safeguard the interests of a company.
What Are Included in a Non-Compete Agreement?
The non compete agreement has several aspects that the involved parties must carefully go-through before forming an agreement. The agreement is formed by experts in legal documentation. It is advisable for both parties to keep the following things into consideration:
- This agreement is directed from one party to the other, mainly from the company to the employee. Most of the time, additional compensation or commission for following this agreement is not involved.
- This agreement imposes a legal obligation onto the representative that leaves the company, to work forward in his career while adhering to the objectives stated in this agreement.
- This agreement is recognized in the sight of the law and any party overstepping or not adhering to the agreement will be liable according to the law of the state, or the penalties described within the same agreement.
- The agreement may seem one-sided at first glance. The representative is asked to adhere to a set of rules without any compensation. However, certain considerations are taken into account to make the agreement agreeable by the representative as well.
Considerations And Obligations for the Employee
Following considerations are kept in perspective for the representative while forming the agreement:
- The content of the agreement is designed in such a way that the representative is not held back in his career at all and the future business ventures are not narrowed for him.
- The representative can even be offered some compensation for abiding by the agreement in rare cases.
- The clauses of non compete agreement is put forth before bringing the representative overboard for work.
- Agreeing and recognizing the relationship formed by the agreement. Moreover, loyalty and goodwill towards the company shall be kept into view as well.
- The representative is essentially denied to work in any capacity whatsoever, for the rivals in a way that it is deemed as competing against the subject company.
- The representative is required by law to carefully analyze the structure of the legal document and agree under law, that it is fairly and rightly set up, and that the rights of the representative are not hurt anywhere whatsoever.
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Get a Free Non Compete Agreement Template Now!
To make sure that there is no harm coming from previous employees working for your competitors right after the separation, using our non-compete agreement template is a wise choice. With all legal terms and clauses to protect your business interests included, this customizable template is available in any industry.
Click here and download a free PDF or Word Template!
Conclusion
When an employee joins a company, he is often given additional information about the production, price, and other miscellaneous information of the products of the company.
This information is often sensitive and can be used by the competitors to wrongfully take advantage of leading the market. The non-compete agreement is used by corporations in order to bind a representative and safeguard their interests in the future after the working term with a representative is over.
DOCUMENT PREVIEW
NON-COMPETE AGREEMENT
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Purpose
This agreement, when countersigned below, shall constitute an agreement regarding certain confidential and proprietary information and trade secrets (“Confidential Information”) relating to the business of _____________________ hereinafter referred to as the “Company” and _____________________ hereinafter referred to as the “Recipient” (collectively referred to as the “Parties”), as of the date executed by the Company (the “Effective Date”).
Recipient shall strictly maintain the confidentiality of the Proprietary Information. Proprietary information may be shared between the Parties for use in scoping, estimating, and completing projects as well as for the everyday business practices for the Company and its clients/customers.
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Non-Compete/Disclosure
During the tenure of the Recipient with the Company and the Time Period stated in Section 3 the Recipient shall not:
(Check All that Apply)
❏ - Business Practices - Provide the same or similar industry products, services, or engage in any other way representation of any other business of a similar nature to the business of the Company without written consent. It is understood that the Recipient will be representing the Company exclusively during their tenure unless written notice has been provided from either of the Parties.
❏ - Clients/Customers - Directly or indirectly engage in any similar business practice of the Company while being in contact with the Company’s current or former clients. Nor shall the Recipient solicit any client of the Company for the benefit of a third party that is engaged in a similar business to that of the Company.
❏ - General Competitor(s) - Engage in business activity, whether paid or non-paid, with a competitor of the Company that provides a similar product or service.
❏ - Specific Competitor(s) - Engage in business activity, whether paid or non-paid, with the following business(es) or individual(s): ______________________
________________________________________________________________
❏ - Employees - Hire, work alongside, or partner with any current employees, sales staff, or former employees or sales staff of Company.
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Time Period
Recipient warrants and guarantees for the _____________________ period following the:
(Check One)
❏ - Effective Date of this agreement.
❏ - Termination of the Recipient’s employment and/or business with the Company.
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Purchase Option
(Check One)
❏ - The Company shall allow the Recipient to void this agreement at any time and release all liability in connection with this agreement by payment to the Company in the amount of _________________ US Dollars ($_______________).
❏ - The Company does not allow the Recipient to be released of liability from this agreement for any monetary amount or reason whatsoever.
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Jurisdiction
The jurisdiction of this agreement shall cover the areas of __________________.
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Confidential Information
As used herein “Confidential Information” shall mean any and all technical and non-technical information provided by the Company, including but not limited to: data or other proprietary information relating to products, inventions, plans, methods, processes, know-how, developmental or experimental work, computer programs, databases, authorship, customer lists (including the names, buying habits or practices of any clients), the names of vendors or suppliers, marketing methods, reports, analyses, business plans, financial information, statistical information, or any other subject matter pertaining to any business of the Company or any it’s respective clients, consultants, or licensees that is disclosed to the Recipient under the terms of this Agreement.
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Permitted Disclosure
Confidential Information does not include information which:
(i) Has become generally known to the public through no wrongful act by the Recipient;
(i) Has been rightfully received by Recipient from a third party without restriction on disclosure and without breach of an obligation of confidentiality running either directly or indirectly to the Recipient;
(ii) Has been approved for release to the general public by written authorization of the Company;
(iii) Has been disclosed pursuant to the requirement of a governmental agency or a court of law without similar restrictions or other protections against public disclosure; or,
(iv) Has been independently developed by the Recipient without use, directly or indirectly of the Company’s Confidential Information.
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Confidentiality
Recipient acknowledges that it will have access to the Company’s Confidential Information and agrees that it shall not directly or indirectly divulge, disclose or communicate any of the Confidential Information to any third party, except as may be required in the course of any formal business association or dealings with the Company and in any event, only with the prior written approval of the Company. The Recipient acknowledges that no license of the Confidential Information, by implication or otherwise, is granted to the Recipient by reason of this Agreement. Additionally, the Recipient acknowledges that it may only use the Confidential Information in connection with its business dealings with the Company and for no other purpose without the prior written consent of the Company. The Recipient further agrees that all Confidential Information, including without limitation any documents, files, reports, notebooks, samples, lists, correspondence, software, or other written or graphic records provided by the Company or produced using the Company’s Confidential Information, will be held strictly confidential and returned upon request to the Company. The term of this Agreement will be ongoing as long as the Parties are working together in any formal capacity. The conditions of this Agreement shall survive the termination of this Agreement.
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Consultants and Employees Bound
Recipient agrees to disclose the Confidential Information to any agents, affiliates, directors, officers or any other employees (collectively, the “Employees”) solely on a need-to-know basis and represents that such Employees have signed appropriate non-disclosure agreements or taken appropriate measures imposing on such Employees a duty to third parties (1) to hold any third party proprietary information received by such Employees in the strictest confidence, (2) not to disclose such third party Confidential Information to any other third party, and (3) not to use such Confidential Information for the benefit of anyone other than to whom it belongs, without the prior express written authorization of the Company.
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Return of Materials
Upon termination or expiration of the Agreement, or upon written request of the Company, the Recipient shall promptly return to the Company all documents and other tangible materials representing the Company’s Confidential Information and
