Non-Compete Agreement
Definition
A contract that restricts an employee from working for competitors or starting a competing business for a set time after leaving the company.
What is a Non-Compete Agreement?
These agreements limit where and how an employee can work post-employment, typically to protect trade secrets, customer relationships, or proprietary practices. Enforceability varies widely by state, but must be reasonable in scope, geography, and duration.
Why are Non-Compete Agreements Important for Employers?
- Helps retain intellectual property and client relationships
- Prevents unfair competition
- Protects business investments by limiting employee departures to direct competitors
FAQs
Are non-compete agreements enforceable?
It depends on the state, or even the city. Some states enforce them if they’re reasonable in scope, geography, and duration, while others, like California, ban them entirely.
What must a non-compete agreement include to be valid?
It should protect legitimate business interests (e.g., trade secrets, client relationships) and not unreasonably restrict the employee’s ability to work.
Can a PEO help draft non-compete agreements?
Yes. ExtensisHR can help develop agreements that comply with state laws and reflect best practices in employee onboarding.
How ExtensisHR Can Help
We assist clients in protecting their business interests by:
- Drafting clear, enforceable agreements in line with state laws
- Providing policy templates and best practices
- Training managers on usage and communication
- Keeping up with changes and legal developments, including FTC guidance and state- or city-level restrictions