Non-compete agreements can be used when employers wish to prevent employees from working for competitors after their employment ends. As long as they’re allowed under state and federal law, you can use these agreements to ensure that your proprietary or confidential company information is not used to help a competitor. Many people wonder if there’s an easy non-compete template that can be used to create the agreement. The short answer to that is no, you can’t use a standard non-compete form.
For the long answer, here’s what to know about drafting your own non-compete agreements.
What is a non-compete agreement?
A non-compete agreement is a legally binding contract between two parties—usually employers and contractors, consultants, or employees. It is designed to prevent employees from working for a competitor for a certain length of time after their employment ends. It can be part of a broad employment contract or a standalone agreement. Often, it includes non-disclosure provisions to further protect confidential information.
This protects employers by protecting their place in the market and reducing turnover. Employees gain the benefit of long-term employment, but the restrictions can make finding future employment difficult. Should the employee violate the non-compete agreement, they’ll be liable for the penalties in the contract.
What should be included in a standard non-compete agreement?
When you draft your own non-compete agreement, it should include the following components:
- Parties involved: Define who the agreement binds and protects—typically the employer and a prospective employee.
- Legitimate business interest: Before you ask an employee to sign a non-compete agreement, make sure that it is to protect a legitimate business interest. Reasons vary, but can include protecting confidential company information, techniques, and more. The agreement needs to be tailored to the individual employee and the scope of their employment.
- Scope and competitors: Your agreement should apply only to a specific industry or activity; it cannot restrict an employee from seeking employment in unrelated fields. It is important to clearly define the scope of the agreement by identifying proprietary techniques, information, processes, or practices that pertain to your business. Be sure to specify which competitors, industries, or types of businesses are prohibited under the agreement.
- Geographic location: Non-compete agreements must specify a reasonable geographic location that parties are prohibited from competing in.
- Duration: Finally, non-compete agreements must specify a reasonable duration. Indefinite restrictions are unenforceable. For best results, you’ll need to agree upon a duration that’s reasonable for the business purpose, industry, and specific type of employment.
How long are non-compete agreements good for?
In short, non-compete agreements are usually good for as long as a court would find reasonable. The definition of a reasonable duration can vary, based on factors like the industry and job title. Most non-compete agreements last about a year, which generally protects the employer’s confidential information without giving them a grossly unfair advantage.
It’s also important to note that non-compete agreements may soon be invalidated on the federal level. The FTC has proposed a rule to ban non-compete agreements. If it goes into effect, this means that all current non-compete agreements will be unenforceable, even if they were lawful when signed. However, that rule is likely to go through many different changes and legal challenges. SixFifty is monitoring the situation and will keep you informed of any updates.
How to create a valid non-compete agreement with SixFifty
To create a valid, enforceable non-compete agreement, you’ll need to draft a contract that complies with all applicable federal and state laws. With all the variance between jurisdictions, using a general non-compete template is probably not going to be tailored narrowly enough to hold up in court.
Drafting your own agreement from scratch or hiring a lawyer can be time-consuming and expensive. Instead of racking up billable hours and continuously researching changes to state and federal law, SixFifty has a better solution.
SixFifty’s Employment Agreements platform pairs real legal expertise with easy-to-use technology. Our software allows employers to create legally compliant employment documents by answering a few questions about their company, then downloading the generated document. You’ll get top-tier employment documents that comply with all federal and state laws. Plus, if the law ever changes—such as if the FTC-proposed ban goes into effect—we’ll automatically update you. No need to rack up billable hours or do your own legal research when you can draft enforceable agreements within minutes. For more information about SixFifty’s employment tools, schedule a free product demo today.