What Are Non-Compete Agreements?

What Are Noncompete Agreements

Non-compete agreements, also known as covenants-not-to-compete, are required by some employers when an employee is starting a new job. An employer can ask an employee to sign a non-compete agreement at any time.  Most non-compete agreements state that the employee will agree not to start a competing business or go to work for a competitor within a specified geographic area for a certain period of time after leaving. Some even include a clause prohibiting employees from revealing proprietary (confidential) information after the employment relationship ends.

How Do Non-Competes Work?

A non-compete agreement is a contract. In a valid contract, there must be an offer, acceptance, and consideration.  Consideration is a bargain for exchange in money, goods, services, or a promise to do or refrain from doing something.  For a noncompete agreement to be valid, you should receive something in exchange for your promise not to take other employment opportunities in your geographic area or your profession.  The consideration in the case of noncompete agreements is often a job.

How Will Non-Compete Agreements Limit You?

In general, non-competes must be reasonable and cannot place too many restrictions on the employee.  Since these agreements limit the competition an employer will face, sometimes long after the employee leaves the company, some states don’t allow non-compete agreements at all. Other states limit the duration and geographic scope of such agreements.  States limit the scope of non-compete agreements by not enforcing contracts that last too long, cover too much territory, or otherwise place too many limits on an employee’s right to move on to other employment opportunities without leaving their profession.