A non-compete agreement, also referred to as a “non-solicitation agreement”, is a contract that is usually made between an employer and an employee to ensure that any information learned about the business is not used against the employer in the future. Therefore the employee will be prohibited, depending on what’s written in the agreement, from working for competitors, starting their own business (in the same industry), or working in a specified area.
Most States have regulations against non-compete agreements such as California that has outright banned them. Nevertheless, it’s a good idea to have a non-compete especially if the individual will have some type of ownership in the business.
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
- Business Purchase Non-Compete
- Consulting Non-Compete
- Employee Non-Compete
- Independent Contractor (1099) Non-Compete
Table of Contents
- Non-Compete Agreements: By State
- Non-Compete Agreements: By Type
- What is a Non-Compete?
- How to Get Out of a Non-Compete (4 Options)
- Enforcing a Non-Compete
- State Laws
- How to Write a Non-Compete Agreement
A non-compete is a restrictive clause that prevents its signatory from competing with the company that has hired them, either by working with a competing company or by starting their own. A non-compete can be applied to anyone who has been given access to sensitive information; this term can be defined as any confidential or proprietary data that could be beneficial to the business competitors of its owner. By having an employee, independent contractor, consultant, or any other individual privy to the confidential information sign a non-compete, the business owner is preventing that person from taking what they’ve learned during their time with the company and use it to their professional advantage.
Non-Compete. The Employee shall be prohibited from rendering services for themselves or any organization which engages directly or indirectly in any business which, in the sole judgment of the Employer, is or becomes competitive with the Company while employed and during the ____ months after the termination.
Non-Solicitation. During the period of employment and the following ____ months after the Employee’s termination, the Employee shall not, without the Employer’s prior written consent, directly or indirectly; (i) solicit or encourage any person to leave the employment or other service of the Employer or its affiliates; or (ii) hire, on behalf of the Employee or any other person or entity, any person who has left the Employer within the one (1) year period following the termination of that person’s employment with the Employer or its affiliates. The Employee agrees to not, whether for its own benefit or for the benefit of someone else, intentionally interfere with the relationship of the Employer or its affiliates with, or endeavor to entice away from the Employer or its affiliates, any person who during the term of the Agreement is, or was a tenant, co-investor, co-developer, joint venturer or other customer of the Employer or its affiliates.
Getting out of a non-compete is not the easiest thing for an employee especially in the tech industry. An individual will commonly have to resort to buying out themselves from the non-compete or deciding to compete in another area outside the non-compete’s jurisdiction.
Option 1 – Check State Laws
Many employers will have an individual sign a non-compete whether or not it is legal in the State. An employer benefits from having the employee feel as though they are restricted as their employer may still bring them to court knowing the employee will not have the funds to defend themselves.
Therefore, checking the laws in the State (View State Laws) to verify if the non-compete agreement that was signed is valid should be the first (1st) step.
Option 2 – Request a Release
Using the Non-Compete Release Form a past employee or independent contractor may use to free themselves of a non-compete agreement. The former employer, depending on how valuable the information that was transferred, may be hesitant to sign such an agreement without compensation.
Option 3 – Leave the Trade Area
Most non-compete agreements are only for a specific trade area such as a specific distance (radius of a location), City, County, State, or Nationwide. If the employee is able to re-locate and practice their trade outside the non-compete trade or market area, that could be the best option.
This is not always recommended but if the employer is unreasonable to allow the individual to break the non-compete, he or she may have to violate the contract. This means going out and performing the work that they are not supposed to be performing and risking themselves, along with their employer, of legal liability. This should only be an option if the individual feels as though the employer is small enough where they would not want to fight a legal battle against the person violating the contract.
Enforcing a non-compete requires legal counsel and the ability to show the other party that a lawsuit will be filed unless they stop what they’re doing. Most non-compete violations never go to court and a resolution almost always occurs after the violating party is shown the legal and financial ramifications if they do not comply.
State Laws – You must check with State laws to ensure the agreement is legally enforceable in the State.
Step 1 – Send a Cease and Desist Letter
A cease and desist is the first step in informing the party that they are in violation of the non-compete agreement. The letter should be concise and cautionary, clearly communicating the sender’s willingness to go to court to protect their interests if necessary. It should notify the other party, in no uncertain terms, that monetary damages will be sought and that there will be no second warning. If all goes well, this is the only necessary step required in convincing the other party to immediately stop violating the agreement. Generally speaking, this document will be sent by the business owner’s lawyer.
Step 2 – Prepare with Legal Counsel
If the violating party doesn’t cease and desist, legal counsel should begin to build a case. A business lawyer that specializes in non-compete and non-solicitation will work with the business owner to ascertain whether the non-compete was used to protect “legitimate business interests,” whether it would be considered reasonable in it’s restrictions of geographical area, scope, and time, and whether the clause is legally enforceable in the state. The lawyer will also work to determine whether the violating party has any strong defenses against a lawsuit that their legal counsel can apply when counter suing. With a strong case prepared, the business owner can proceed with legal proceedings.
Step 3 – Begin Court Proceedings
If the business owner believes they have a sufficiently strong case, they can file a complaint with state or federal court. It is recommended that they ask the court to issue an injunction immediately. This action will stop any further violations of the non-compete during court proceedings. As mentioned above, a court’s verdict will vary depending on the state in which the non-compete was signed and the broadness of the non-compete clause (i.e., the radius of the geographical range in which the employee cannot work and the length of time). In predicting the probable verdict, both the business owner and violating party will often resolve the issue with an out of court settlement.
|Alabama||Yes||Cannot prohibit a person from providing a lawful profession, trade, or business of any kind.||§ 8-1-190|
|Arizona||Yes||Cannot be television station, television network, radio station or radio network.||ARS § 23-494|
|Arkansas||Yes||Cannot be unreasonable in length or scope|
|California||No||Any contract to restrains anyone from engaging in a lawful trade, business, or profession is considered void.||Sections 16600-16607|
|Colorado||Yes||Cannot prohibit the right of a person to receive compensation for skilled or unskilled labor unless for the purchase or sale of a business, for protection of trade secrets, for the recovery of training costs, for executive and management personnel.||§ 8-2-113|
|Connecticut||Yes||Broadcasters and security guards are exempted.||C.G.S. 31–50a – C.G.S. 31–50b|
|Florida||Yes||Must be reasonable in time, area, line of business.||§ 542.335|
|Georgia||Yes||Must be reasonable in time, area, and scope.||GA Code § 13-8-53 (2018)|
|Hawaii||Yes||Must be reasonable in time, area, and scope. Cannot be used in relating to employee of technology business.||§ 480-4|
|Idaho||Yes||Must be reasonable in time (18 months maximum), area and scope.||Idaho Code §§ 44-2701 and §§2704|
|Illinois||Yes||Broadcasters, government contractors, physicians, low-income workers are exempted. It is standard that they must be reasonable in time, area and scope.||No General Statute|
|Indiana||Yes||Must be reasonable in time, area, and scope.||No General Statute|
|Iowa||Yes||Must be reasonable in time, area, and scope.||No General Statute|
|Kansas||Yes||Must be reasonable in time, area, and scope. Accountants have limited exemption.||No General Statute|
|Kentucky||Yes||Must be reasonable in time, area, and scope.||No General Statute|
|Louisiana||Yes||Valid only if limited to parishes, municipalities, or parts thereof. Must not exceed two (2) years.||RS 23:921|
|Maine||Yes||Must be reasonable in time, area, and scope. Exemptions include the broadcast industry and low-wage workers||No General Statute|
|Maryland||Yes||Must be reasonable in time, area, and scope.||No General Statute|
|Massachusetts||Yes||Cannot be over twelve (12) months following termination. Must be reasonable in geographical area and scope.||Mass. Gen. Laws c. 149, § 24L|
|Michigan||Yes||Must be reasonable as to its duration, geographical area, and the type of employment or line of business.||§ 445.774a|
|Minnesota||Yes||Must be reasonable in time, area, and scope.||No General Statute|
|Mississippi||Yes||Must be reasonable in time, area, and scope.||No General Statute|
|Missouri||Yes||Must be reasonable in time, area, and scope. There are limited exemptions for clerks and secretaries.||§ 431.202|
|Montana||Yes||Must be reasonable in time, area, and scope. Must not impose unreasonable burden upon employer, employee, or public.||§28-2-703, §28-2-704, and §28-2-705|
|Nebraska||Yes||Must be reasonable in time, area, and scope to not be unduly harsh on employee.||No General Statute|
|Nevada||Yes||Void unless it is supported by valuable consideration, it is not greater than necessary to protect the employer, and it will not bring undue hardship on the employee.||NRS 613.195|
|New Hampshire||Yes||Must not place disproportionate hardship on employee. Must be reasonable in scope, area, and time.||§ 275:70|
|New Jersey||Yes||Cannot be overly broad with regard to geographical area, time, and scope||No General Statute|
|New Mexico||Yes||Healthcare practitioners have limited exemption.||No General Statute|
|New York||Yes||Must be reasonable in time, scope, and geography. Must protect legitimate business interests.||No General Statute|
|North Carolina||Yes||Must be in writing. Must be reasonable in time, scope, and area.||§ 75-4|
|North Dakota||No||N/A||§ 9-08-06|
|Ohio||Yes||Must be reasonable in time, cope, and area.||No General Statute|
|Oklahoma||No||N/A||OK Stat. § 15-219A|
|Oregon||Yes||Must be provided at least two (2) weeks before employment or with a bona fide advancement. Cannot exceed eighteen (18) months. The employee is a person described in ORS 653.020 (Excluded employees). Must not be overly restrictive in scope or geographical area.||§ 653.295|
|Pennsylvania||Yes||Must be reasonable in time, space, scope.||No General Statute|
|Rhode Island||Yes||Must be reasonable in time, area, scope.||No General Statute|
|South Carolina||Yes||Must be reasonable in time, area, and scope.||No General Statute|
|South Dakota||Yes||All contracts are void except as provided by §§ 53-9-9 to 53-9-12||§ 53-9-8|
|Tennessee||Yes||Must be reasonable in time, area, and scope.||No General Statute|
|Texas||Yes||Must be ancillary to other employment agreement. Must be reasonable in time, area, and scope.||§ 15.50-52|
|Utah||Yes||Cannot exceed one (1) year following end of employment. Some restrictions apply to broadcasting employees||§34-51-201|
|Vermont||Yes||Must be reasonable in time, area, and scope.||No General Statute|
|Virginia||Yes||Restriction cannot be greater than is necessary to protect the employer’s business interest.||No General Statute|
|Washington||Yes||Effective 1/1/2020, notice must be provided before the agreement becomes effective and/or before offer is accepted; restriction cannot exceed eighteen (18) months; restriction cannot avoid Washington law or require adjudication out of state.||No General Statute|
|West Virginia||Yes||Must be reasonable in time, area, and scope.||No General Statute|
|Wisconsin||Yes||Must be reasonable in time, area, and scope.||§ 103.465|
|Wyoming||Yes||Must be reasonable in time, area, and scope. Must be ancillary to otherwise valid agreement.||No General Statute|
1 – Download This Paperwork To Issue A Non-Compete And Non-Solicitation Agreement
The two blue buttons prominently displayed with the image (“Adobe PDF” and “Microsoft Word”) on this page will allow you access to the template agreement. Make your selection by clicking one of these buttons. If you do not have MS Word or an Adobe editor, you can use your browser to access and print the Adobe version of this agreement.
2 – Document The Legal Identity Of The Employee And The Company Placing These Conditions
Before we proceed with the terms of this document, you must attach both parties to it. The first we will focus on is the Employee who will enter this agreement and accept its terms by signature. Place his or her name on the empty line attached to the parentheses text “Employee.” The second blank line anticipates the legal name of the “Company” that is issuing this agreement to the Employee.
3 – Discuss The Time Period Involved With The Restrictions Placed
Locate the words “The Agreement Is Effective…” then employ the three following spaces to present the first calendar date that both above parties will be obligated to adhere to the terms below. Record this as the two-digit calendar day, its corresponding month, and the appropriate year. Several articles will seek to define how these parties should behave and for how long, however, some will seek input to be applicable to the current situation especially since some local laws may call for different time frames. Locate the first of these items (“I. Term Of Agreement”) then, fill in how many years this agreement will remain active for following the end of the Employee/Company relationship. The next item that will need material to supplement its wording is “III. Covenant Not To Compete” This will have two requirements. The first of which will be to identify the number of years that the Employee will be restricted from participating in any business engagements that can cause or involve competition for the Company’s market and resources on the first blank line. The second available space will seek a radius of miles where the Employee will be prohibited from any business activities that may compete with the Company. The fourth article here will also require a detail provided to its contents. Find the blank line in “IV. Non-Solicitation” then, use the blank space presented to document the number of years after the Employee’s termination that he or she will be forbidden from contacting the Signature Company’s Contractors and Employees on behalf of a competing entity or on the Employee’s own behalf with the intention of engaging in any business that would compete for their projects. The fifth item will concern itself with protecting the Company’s Customers and Contacts. This item (“V. Soliciting Customers After Termination Of Agreement”) prohibits the Employee from disclosing any Client information to a competing entity or use that information to engage in a business that competes in any way with that of the Company for a number of years. You will need to report this number of years on the blank space this article contains.
4 – Identify The Location Of This Agreement Before Executing It Properly
The eleventh article in this contract will seek a specific location as to where this agreement will hold both the Employee and the Company obligated to this paperwork. The first blank line in “Jurisdiction And Venue” will require the name of the State whose laws hold jurisdiction over this agreement. The second blank space will need the county where this agreement is upheld produced to its contents and the state furnished to the third blank line. The Employer or Company will need to sign this document in order to execute it. If this is an entity, then an Authorized Representative who may sign on behalf of the Employer Entity must sign the “Employer’s Signature” line then produce his or her printed name underneath it. To the right, on the linea labeled “Date” and “Title,” the Signature Representative will be required to produce the exact calendar date when he or she signed this contract as the Employer along with the official name of the position he or she holds with the Company. The Employee should take a moment to review this agreement in full before signing it. One the Employee signs the “Employee’s Signature” line he or she will agree to the acknowledgment statement just above it and to the contract as a whole. Additionally, he or she must furnish the exact calendar date when he or she signs this as well as his or her printed name (“Print Name”).