Free Noncompete Agreement

Occasionally, when a key employee or former owner of a company is terminated or leaves the company, that departing individual will have developed relationships with some of the employees of the company and may wish to take those employees with them. Of course, this could lead to a significant drain on the Protected Party's workforce if several key employees decide to follow the departing individual. Therefore, it is common to prohibit the Noncompeting party from contacting any of the Protected Party's employees about a possible job for a specified number of years. Although it can be very difficult to prove that an employee quit at the urging of the Noncompeting Party if the Noncompeting Party circumvents the prohibition in a secretive manner, this provision does serve to at least provide a warning to the Noncompeting Party not to attempt such practices.

Generally, for a Noncompete Agreement to be enforceable, the party who wishes to be protected must have a protectable business interest in specific customer or trade information. In addition, the restrictions must be reasonably limited with respect to the scope of the prohibited activity, the time period that the restrictions will be in effect, and the territory in which the activity will be prohibited. A determination of reasonableness may depend on the specific facts of each situation. A court will also look to see if enforcement of the do-not-compete clause would cause undue hardship to the parties or cause harm to the general public.

Note: Because of important state specific requirements, a lawyer should be consulted before using this document. State law regarding Noncompete Agreements is particularly stringent in Alabama, California, Colorado, Hawaii, Louisiana, Montana, North Carolina, North Dakota, Oklahoma, Oregon and South Dakota.

The Noncompete Agreement includes a "non-solicitation" covenant (agreement). This covenant provides some protection against the possibility that the Noncompeting Party might try to use customer information and contacts with employees of the Protected Party to compete with the Protected Party. Although this may not ensure that the Noncompeting Party will not try to circumvent these provisions by acting in a secretive manner, it does provide at least a "warning" to the Noncompeting Party.

The Noncompete Agreement is an agreement under which one party (the "Noncompeting Party") agrees not to compete with another party (the "Protected Party"). The need for this type of agreement can arise from a number of circumstances. Examples include; (i) business parties that are terminating their working relationship, (ii) a buyer (the Protected Party) who is purchasing a business from its current owner (the Noncompeting Party), and (iii) an employer/employee relationship that is being terminated.

In such cases, the Protected Party may wish to obtain agreements from the Noncompeting Party stating that the Noncompeting Party will not; (i) engage in a similar business, or (ii) solicit the Protected Party's customers or employees.

In some cases, the employer may have already obtained some protection from competition by including a Noncompete Provision in an employment agreement. Generally, the Noncompete Agreement should not be used with such an employee, unless the agreement is being used in connection with a termination.

The Noncompete Agreement should be signed by both parties and becomes effective as of the date specified in the Agreement.

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The Noncompete Agreement offers a confidentiality paragraph that obligates the Noncompeting Party to protect and not disclose the Protected Party's proprietary or confidential information. For example, this would prohibit the Noncompeting Party from telling his or her new employer the production process of the Protected Party. A provision may also be included which will require the Noncompeting Party to return all records, notes, documentation, and other information within a specified number of days after being requested to do so. If this agreement is being executed as part of an employee termination, such a request should be made at the time the agreement is executed.

"Confidential information" is information that is unique, and for which there would be harm if it was disclosed. Court decisions vary from state to state, and in some cases, may impose a reasonable time limit regarding the time period for which the Protected Party's information must be kept confidential. The confidentiality limitations should be reasonable in light of state law requirements and the needs and practices of the Protected Party's business and industry.

A payment to the "Noncompeting Party" under a Noncompete Agreement is necessary in order for the agreement to be enforceable. The amount of the payment should be reasonable when compared to the loss of the "ability to compete" that is being made by the Noncompeting Party. In many cases, a substantial payment will not be required. However, if the Noncompeting Party's ability to "earn a livelihood" is affected significantly, the payment amount will need to be more substantial.

When a "noncompete" provision is included as a part of an employment agreement or consulting agreement, a separate payment for the "noncompete" provision is not required. However, in this "stand alone" Noncompete Agreement, the Noncompeting Party is not bound by the agreement unless the Noncompeting Party is receiving something (for example, a payment) in consideration for agreeing not to complete. In the context of an employment relationship, it is not adequate to simply offer continued employment of indefinite duration.

If a confidentiality provision is included, it is also advisable to request of the Noncompeting Party the return of all records, notes, documentation or any other items that may be of importance that relate to and are the property of the Protected Party. The interview for this document allows the user to specify the period of time that the Noncompeting Party will have to return all materials after receiving a written request to do so. If the agreement is being entered into because of a termination of employment, it is recommended that the written request be given to the Noncompeting Party at the first available opportunity.

1. The Noncompete Agreement should be signed by both parties (the "Protected Party" and the "Noncompeting Party"), and becomes effective as of the date specified in the Agreement. It is not necessary that the signatures be witnessed or notarized.

2. It is advisable to sign two copies of the Agreement so that each party will have a copy with original signatures. Original copies should be kept in a fire-proof and safe location or stored securely online.

3. A lawyer should be consulted regarding any questions about the noncompete and non-solicitation covenants that are included in this Agreement, or regarding any issues not addressed by this document.

4. The Agreement will terminate in accordance with the time period(s) established for the covenants in the Agreement, or earlier by the mutual agreement of both parties. Any such mutual termination should be made in writing and signed by both parties.