Business Non-Compete Agreement

Business Non-Compete Agreement

CRITICAL: State Law Variations

Non-Compete Enforceability by State (2024-2025)

IMPORTANT: Non-compete law varies dramatically by state. Some states ban non-competes entirely, others restrict them to certain employees, and others allow them broadly. You MUST verify current law in your state before using this agreement.

States That Broadly Prohibit Employee Non-Competes

States with Significant Restrictions (Income/Position Thresholds)

States with Moderate Restrictions

States with Fewer Statutory Restrictions

Florida, Indiana, Kentucky, Missouri, Ohio, Pennsylvania, Tennessee, and others rely primarily on common law reasonableness standards.

Purpose of This Template

This Non-Compete Agreement is designed to protect legitimate business interests when enforceable under applicable state law. Common legitimate interests include:

• Trade Secrets - Protecting confidential proprietary information
• Customer Relationships - Preventing solicitation of cultivated relationships
• Specialized Training - Recouping investment in employee development
• Business Goodwill - Protecting value in sale of business

Pre-Agreement Checklist

State Law Verification

☐ Verified current state non-compete law
☐ Confirmed employee meets any income thresholds
☐ Confirmed employee meets any position requirements
☐ Reviewed any required notice periods
☐ Confirmed no pending state law changes

Consideration Requirements

☐ New Employment - Employment offer is consideration
☐ Existing Employee - Additional consideration provided:
☐ Promotion
☐ Raise (amount: $_______)
☐ Bonus (amount: $_______)
☐ Stock/equity grant
☐ Access to confidential information
☐ Specialized training
☐ Other: _________________________________

Timing Requirements (State-Specific)

☐ Agreement provided _____ days before employment (if required)
☐ Employee given adequate time to review
☐ Employee advised to consult attorney

Employee Non-Competition Agreement

Parties

EMPLOYER:
| Field | Information |
|-------|-------------|
| Company Name | |
| Address | |
| State of Incorporation | |
| Primary Business | |

EMPLOYEE:
| Field | Information |
|-------|-------------|
| Name | |
| Address | |
| Position/Title | |
| Start Date | |
| Annual Compensation | $ |

Recitals

WHEREAS, Employer is engaged in the business of: _________________________________

WHEREAS, Employee is employed by Employer in the position of: _________________________________

WHEREAS, Employee has access to or will receive: (check all that apply)
☐ Trade secrets and proprietary information
☐ Confidential customer lists and relationships
☐ Specialized training worth: $_____________
☐ Other valuable business information: _________________________________

WHEREAS, the parties wish to protect Employer's legitimate business interests while providing fair terms to Employee;

NOW, THEREFORE, in consideration of the mutual promises herein and other good and valuable consideration, the parties agree:

Article I: Definitions

Section 1.1 - Key Terms

"Competing Business" means any business that:
☐ Provides products/services substantially similar to Employer's
☐ Operates in the same industry as Employer
☐ Specifically: _________________________________
☐ Excludes: _________________________________

"Confidential Information" means:
☐ Trade secrets
☐ Customer lists and information
☐ Pricing information
☐ Business strategies
☐ Technical information
☐ Financial information
☐ Marketing plans
☐ Employee information
☐ Vendor/supplier information
☐ Other: _________________________________

"Restricted Territory" means:
☐ Geographic area where Employee worked/had responsibility
☐ Specific counties/states: _________________________________
☐ Mile radius from Employer locations: _____ miles
☐ Territories where Employer has customers
☐ Nationwide (use with caution - often unenforceable)

"Restricted Period" means:
☐ Duration: _____ months/years following termination
☐ Beginning on date of termination for any reason

Article II: Non-Competition Covenant

Section 2.1 - Non-Competition Restriction

During the Restricted Period, within the Restricted Territory, Employee agrees NOT to:

☐ Work as an employee for a Competing Business
☐ Serve as a consultant or advisor to a Competing Business
☐ Own an interest in a Competing Business (except passive investment of less than ___%)
☐ Serve as an officer, director, or partner of a Competing Business
☐ Start or assist in starting a Competing Business
☐ Engage in any capacity with a Competing Business
☐ Other: _________________________________

Section 2.2 - Reasonableness of Restrictions

The parties agree that:
☐ The geographic scope is reasonable given Employee's role
☐ The time period is reasonable to protect legitimate interests
☐ The restrictions are no broader than necessary
☐ Employee has had opportunity to negotiate these terms

Section 2.3 - Blue Pencil/Reformation Clause

☐ If any restriction is found overbroad, the court may reform it to the minimum extent necessary to make it enforceable
☐ Invalid restrictions shall not affect remaining valid restrictions

Article III: Non-Solicitation of Customers

Section 3.1 - Customer Non-Solicitation

During the Restricted Period, Employee agrees NOT to:

☐ Solicit business from Employer's customers
☐ Accept business from Employer's customers
☐ Encourage customers to reduce business with Employer
☐ Interfere with Employer's customer relationships

"Covered Customers" means:
☐ All Employer customers during Employee's employment
☐ Customers Employee personally served or had contact with
☐ Customers Employee learned about through Confidential Information
☐ Customers during the last _____ months/years of employment
☐ Prospective customers actively being pursued

Article IV: Non-Solicitation of Employees

Section 4.1 - Employee Non-Solicitation

During the Restricted Period, Employee agrees NOT to:

☐ Recruit or solicit Employer's employees to leave
☐ Hire or engage Employer's employees
☐ Encourage employees to terminate their employment
☐ Assist others in recruiting Employer's employees

"Covered Employees" means:
☐ All Employer employees
☐ Employees Employee worked with directly
☐ Employees in Employee's department
☐ Employees hired during Employee's tenure
☐ Employees earning above: $_____________/year

Article V: Confidentiality Obligations

Section 5.1 - Non-Disclosure

Employee agrees:
☐ Not to disclose Confidential Information to any third party
☐ Not to use Confidential Information for personal benefit
☐ Not to use Confidential Information for benefit of others
☐ To take reasonable steps to protect Confidential Information
☐ To return all Confidential Information upon termination

Section 5.2 - Duration of Confidentiality

☐ Trade secrets: Protected indefinitely
☐ Other Confidential Information: Protected for _____ years after termination

Section 5.3 - Exceptions

Confidentiality obligations do not apply to information that:
☐ Is or becomes publicly available (through no fault of Employee)
☐ Is obtained from third party with right to disclose
☐ Is independently developed by Employee without use of Confidential Information
☐ Is required to be disclosed by law (with notice to Employer)

Article VI: Consideration

Section 6.1 - Consideration Provided

In consideration for these restrictions, Employer provides:

For New Employees:
☐ Employment with Employer
☐ Access to Confidential Information
☐ Training valued at: $_____________
☐ Other: _________________________________

For Existing Employees (REQUIRED in most states):
☐ Continued employment plus:
☐ Salary increase of: $_____________
☐ Bonus payment of: $_____________
☐ Stock/equity grant valued at: $_____________
☐ Promotion to: _________________________________
☐ Other consideration: _________________________________

Section 6.2 - Garden Leave (Required in some states)

☐ Not applicable
☐ Garden leave provided:

• Duration: _____ months
• Compensation during garden leave: _____% of base salary
• Benefits continuation: ☐ Yes ☐ No

Article VII: Enforcement

Section 7.1 - Injunctive Relief

Employee acknowledges:
☐ Breach would cause irreparable harm
☐ Money damages would be inadequate remedy
☐ Employer is entitled to seek injunctive relief
☐ Employer need not post bond for temporary restraining order (if permitted by court)

Section 7.2 - Tolling

☐ Restricted Period shall be extended by any period of violation
☐ Clock stops during any legal proceedings regarding enforcement

Section 7.3 - Notification to New Employers

☐ Employee agrees to notify Employer of new employment within _____ days
☐ Employee agrees to provide copy of this Agreement to new employer
☐ Employer may notify new employer of restrictions

Section 7.4 - Attorneys' Fees

☐ Prevailing party entitled to reasonable attorneys' fees
☐ Each party bears own costs regardless of outcome

Article VIII: Effect of Termination

Section 8.1 - Application to All Terminations

These restrictions apply regardless of:
☐ Whether termination is voluntary or involuntary
☐ Whether termination is with or without cause
☐ Who initiates the termination

EXCEPTION (if applicable):
☐ Restrictions do NOT apply if Employee is terminated without cause
☐ Restrictions do NOT apply if Employer breaches employment agreement

Section 8.2 - Return of Property

Upon termination, Employee shall immediately return:
☐ All documents containing Confidential Information
☐ All company property
☐ All electronic files and devices
☐ All keys, access cards, and credentials
☐ All copies of any of the above

Article IX: State-Specific Provisions

Section 9.1 - State Law Selection

This Agreement is governed by the laws of: State of _________________________

Section 9.2 - State-Specific Compliance

If California, Minnesota, North Dakota, or Oklahoma:
☐ THIS AGREEMENT'S NON-COMPETE PROVISIONS ARE LIKELY UNENFORCEABLE
☐ Non-solicitation and confidentiality provisions may still apply

If Colorado:
☐ Employee is "highly compensated" as defined by state law: ☐ Yes ☐ No
☐ Restrictions protect trade secrets: ☐ Yes ☐ No
☐ Notice provided to Employee: ☐ Yes ☐ No

If Illinois:
☐ Employee earns at least $75,000/year: ☐ Yes ☐ No
☐ Agreement provided 14 days before signing: ☐ Yes ☐ No
☐ Employee advised in writing to consult attorney: ☐ Yes ☐ No

If Massachusetts:
☐ Garden leave or equivalent consideration provided: ☐ Yes ☐ No
☐ Restriction does not exceed 1 year: ☐ Yes ☐ No
☐ Agreement provided before offer or 10 business days before start: ☐ Yes ☐ No

If Oregon:
☐ Employee meets income threshold: ☐ Yes ☐ No
☐ Written notice provided at time of offer: ☐ Yes ☐ No
☐ Restriction does not exceed 18 months: ☐ Yes ☐ No

If Washington:
☐ Employee earns above threshold (~$116,000): ☐ Yes ☐ No
☐ Restriction does not exceed 18 months: ☐ Yes ☐ No
☐ Garden leave provided if terminated without cause: ☐ Yes ☐ No

Article X: General Provisions

Section 10.1 - Entire Agreement

This Agreement constitutes the entire agreement regarding non-competition. It supersedes all prior agreements on this subject.

Section 10.2 - Amendment

This Agreement may only be amended by written instrument signed by both parties.

Section 10.3 - Assignment

☐ Employer may assign this Agreement to successor or affiliate
☐ Employee may not assign this Agreement

Section 10.4 - Severability

If any provision is unenforceable:
☐ Remaining provisions remain in effect
☐ Unenforceable provision reformed to minimum extent necessary

Section 10.5 - Waiver

Failure to enforce any provision does not waive future enforcement rights.

Section 10.6 - Survival

The following survive termination of employment:
☐ Non-competition restrictions (for Restricted Period)
☐ Non-solicitation restrictions (for Restricted Period)
☐ Confidentiality obligations (per stated duration)
☐ Return of property obligations

Section 10.7 - Notices

Notices shall be delivered to addresses above or as updated in writing.

Section 10.8 - Dispute Resolution

☐ Mediation first - Required before litigation
☐ Binding arbitration - Rules: _________________________________
☐ Litigation - Venue: _____________ County, _____________
☐ Employer may seek injunctive relief in any court of competent jurisdiction

Article XI: Employee Acknowledgments

Employee acknowledges and agrees:

☐ I have read this Agreement in its entirety
☐ I understand the restrictions and their impact on my future employment
☐ I have had opportunity to consult with an attorney
☐ I am signing voluntarily and without coercion
☐ The restrictions are reasonable in scope, duration, and geography
☐ The consideration provided is adequate
☐ I have received a copy of this executed Agreement

Signature Page

Employer Signature

Employee Signature

Exhibit A: Specific Confidential Information

The following categories of information are specifically identified as Confidential Information:

1. _________________________________________________________________
2. _________________________________________________________________
3. _________________________________________________________________
4. _________________________________________________________________
5. _________________________________________________________________

Exhibit B: Restricted Territory Map/Description

[Attach map or detailed description of geographic restrictions]

Reasonableness Checklist for Employers

Before Presenting Agreement

☐ Verified current state law permits non-competes for this employee
☐ Confirmed any required income thresholds are met
☐ Prepared adequate consideration (especially for existing employees)
☐ Limited restrictions to actual legitimate business interests
☐ Drafted narrowest reasonable restrictions
☐ Allowed time for employee review and consultation

Geographic Scope

☐ Limited to areas where employee actually worked
☐ Limited to areas where employer actually does business
☐ Avoids nationwide restrictions unless truly necessary
☐ Specific enough to be understood

Time Period

☐ Generally 6 months to 2 years (longer often unenforceable)
☐ Proportional to employee's role and access
☐ Not longer than required to protect interests

Activity Scope

☐ Limited to employee's actual job functions
☐ Allows employee to work in different roles
☐ Specific about what is prohibited

Warning Notices

For Employers

CONSULT AN ATTORNEY. Non-compete law is highly state-specific and constantly changing. An unenforceable non-compete wastes resources and may expose you to claims. Many states now require specific language, notice periods, and consideration.

For Employees

YOU HAVE RIGHTS. In many states, non-competes are unenforceable or highly restricted. Before signing, understand:

• Your state's laws
• Whether adequate consideration is provided
• The actual impact on your future employment
• Consider consulting an employment attorney

Recent Developments

The FTC attempted to ban most non-competes in 2024, but the rule was blocked by federal courts. State laws continue to evolve. Many states introduced restrictive legislation in 2024-2025. Always verify current law.

This template is provided for informational purposes only and does not constitute legal advice. Non-compete enforceability varies dramatically by state. Consult with a qualified employment attorney licensed in your jurisdiction before executing any non-compete agreement.