In a non-compete agreement template, an employee or an independent contractor is prohibited from working for any competing companies or on any projects that are in direct competition with their existing position or from becoming a direct competitor. The contract is only legally binding for a limited period, once your working relationship has come to an end.
One of the objectives of this agreement is to identify methods of ensuring that your employee does not participate in any projects that could harm your company’s market share.
A non-compete agreement is sometimes referred to as a non-compete clause, a non-compete covenant, or a covenant not to compete in some jurisdictions.
Here’s a little video about non-compete agreements to get you started.
When to use a non-compete agreement
Non-compete agreements can be classified into several categories.
a contract prohibiting competitors from doing business with one another
Non-solicitation agreement (also known as a non-disclosure agreement)
Agreement on non-disclosure of trade secrets
A confidentiality agreement is signed by both parties.
When should a non-compete agreement be used?
Here is what you must do to develop and approve a non-compete agreement, especially during a pandemic:
Make a list of your competitors.
Create a non-compete agreement that is unique to you.
Send it to your employee for signature using a low-cost eSignature tool such as SignEasy.
Once the employee has signed the paper contract, you must sign the online version as well.
Take care to ensure that the non-compete agreement template is not unduly restrictive or detrimental to the employee’s employment opportunities. Furthermore, it is possible that this would not be applicable in court, which would be detrimental to employee experience.
Why you should have a non-compete agreement
A non-compete agreement ensures that sensitive information and trade secrets about your company are not disclosed during or after employment. A contract between an employee and an employer protects your companies best practices, client information, pricing strategy, wage structure, and technological breakthroughs.
Additionally, a non-compete agreement prevents former workers and consultants from using the knowledge and contacts they gained while working for your company to start their own competitive business.
Keep in mind that it will not be possible to prevent your employees and contractors from joining or starting their competitive businesses indefinitely. It is only valid for a specified amount of time. Furthermore, it is not enforceable in a large number of states.
What are the benefits of a non-compete agreement
Salespeople are frequently poached by direct competitors, which is a common occurrence. What a nightmare it would be if they were able to take their client list or trade secrets with them! And you stand to lose a significant amount of business. An example of this is when a non-compete agreement template can be really useful.
Another example would be an app developer who has undergone all of the necessary training and has been granted access to your future product development plans. They will soon quit ship and create their own software company, launching a product that is comparable to yours before you even know it. In these types of instances, a non-compete agreement can come in handy. Employees are discouraged from departing and launching a competitor business as a result of this policy.
In all circumstances, a non-compete agreement will not only deter employees from resigning but will also protect your company from unfair competition.
Simply print off the template (available for free here), submit it to SignEasy, make any necessary edits, and push send. You will be legally protected while also saving time and money by not having to spend hours creating these contracts.
In the case of employees
The prospect of future employment with the company is the most powerful inducement for an employee to sign a non-compete agreement with the corporation. Employers may also offer incentives such as promotions, more expensive and rigorous training sessions, and other benefits in exchange for signing this contract. The most appealing aspect, of course, is the possibility of landing the position.
The value of having this contract written is often overlooked by employers until their employees begin selling their products on the black market or working for competitors in the same industry. However, at that time, it is too late. Even if you ask your employees to sign a non-compete agreement after they have already done so, they may decline to do so. You have less negotiation power because they already have all of the necessary know-how. They can always start something on their own or take the information with them to another company, reducing your bargaining power.
As a result, always obtain signatures on the non-compete agreement before onboarding a new employee or contractor. To reduce delays during COVID, make sure you use SignEasy to keep the transaction hygienic and contact-free to avoid any interaction.
Components of non-compete agreement template
You begin the non-compete agreement form with a full opening set of paragraphs, just as you would with most other agreements. This comprises the effective date on which the agreement will take effect, the names and contact information for the parties involved in this contract, and a brief description of the employee’s responsibilities.
The phrase “agreeing to the restrictions as partial compensation for the Company’s assurances implicit in the Employment Agreement” appears in the screenshot below, which you can read more about here. This remark attempts to demonstrate that the agreement is not imposed on the employee, but rather is a barter arrangement between the two parties.
Take note that you must include a copy of the employment agreement as well as the non-compete agreement as proof. Non-competition
Among all of the contract’s components, this is likely the most important one. It specifies the length of time that the non-compete limitations on the workers or contractors will be effective. A list of the types of firms that you consider competitors, as well as the geographical areas covered by the agreement, can also be included in the document.
Employee expressions of gratitude
Courts are notoriously strict about not allowing employers to trick employees into signing non-compete agreements without fully comprehending the implications of the agreements’ stipulations. To counteract this, you will notice that this section specifically states that the signers were allowed to obtain legal advice and discuss the contents of this agreement.
employee acknowledgments in non-competition agreements applicable legal rules and regulations
This is an important section to read because non-compete regulations differ from one state to the next. It merely specifies which state’s laws will apply to this contract and how.
Non-Compete Agreement Section of the law that applies
Identifying the applicable law in an NCA Signature
The non-compete agreement is regarded as legally binding once both the employee and the employer sign on the dotted line. It is necessary to provide the names of the company, its agent, and the employee in this area, as well as the date. You might use an eSignature system such as SignEasy to allow new employees to sign these documents from anywhere in the world. SignEasy can also automatically remind candidates to sign the paper, allowing you to save time by not having to manually follow up on their signatures anymore.
How can you make the non-compete agreement more enforceable?
If you are overly strict with your non-compete agreement rules, your employees may feel as if they have no choice but to comply. Furthermore, an excessive amount of limitation may cause a person to quit their job entirely, reducing your pool of available talent by a large amount.
Furthermore, most jurisdictions recognize that an employee’s ability to earn a living outweighs the right to enforce a non-compete agreement. As a result, the less restrictive the agreement is, the more likely it is that it will be imposed upon the parties.
All things considered, the following are some recommendations for structuring a legally binding non-compete agreement template:
Do not prohibit an employee from working for a competitor for an indeterminate period. Typically, the agreement lasts between 6 months and 2 years after the employee has left the organization, depending on the circumstances. However, this differs from jurisdiction to jurisdiction, so be sure to consult with a local legal representative.
Allow the scope of the contract’s stipulations to be restricted to only the specific employee in question. You should not prohibit relatives of an employee from working for a competitor company.
Make a note of some of the most important aspects of the employee’s job description and responsibilities.
For the employee to sign the non-compete agreement, you must demonstrate that you (the employer) provided something of value in exchange.
Include a provision that permits employees to work for competitive firms or to start their own with commercial interests that are not within your jurisdiction.
FAQs on Non-Compete Agreements
Employees who are presented with a non-compete agreement that they believe is overly restrictive are more likely to refuse to sign it. Also, keep in mind that irrational terms are unlikely to be upheld in a court of law because of the far-reaching repercussions they can have.
Non-compete agreement (sometimes known as a non-disclosure agreement):
Template for a Non-Compete Agreement
Non-Compete Agreement Template Frequently Asked Questions about Non-Compete Agreements
What is the best way to get around a non-compete agreement?
You might consider going to court if you have broken the provisions of a non-compete agreement as an employee and the company has filed a lawsuit against you to recover damages. Of course, when employees violate this contract, many employers choose not to take legal action against the violating employee.
What is the effectiveness of a non-compete agreement?
In general, once a non-compete agreement is written, it legally prohibits employees from joining other enterprises or from starting their businesses for a specified amount of time after they have left your organization. However, in places such as California, North Carolina, and Oklahoma, the judicial system completely disregards these settlements and agreements.
What constitutes a breach of a non-compete agreement?
An agreement prohibiting an employee from competing is deemed null and void where it can be demonstrated that the employee never signed it in the first place or if the agreement violates the public’s best interests.
What is the best way to construct a non-compete agreement?
The following are the procedures to take to create a non-compete agreement template:
Determine who your direct competitors are.
Create a contract from scratch, or simply customize the non-compete agreement template.
Ensure that the final manuscript is examined by a legal practitioner before submitting it for publication.
Send the non-compete agreement to your employee using an eSignature service to get his or her signature.
As soon as they sign the document, have your representative review and approve the document.
Which of the following is an example of a non-compete agreement:
A non-compete agreement template will assist you in understanding all of the conditions that must be included to prevent employees from working for competitors. Here is an example of a template of this nature.
What is a typical non-compete clause in a business contract?
A non-compete clause is a clause in a contract that specifies the conditions under which an employee is prohibited from working with direct competitors. It is one of the most common types of clauses. It goes something like this: “For the duration of the Agreement and [for some time] following the termination of the Employee’s relationship with the Company, the Employee will not a) engage in any other capacity with a competing company, including as an employee, officer, director, partner, consultant, agent, or owner; or b) engage in any other capacity with a competing company, including as a competitor.” In other words, the Employee is not permitted to work for [company type] in [geographic region].