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A non-compete agreement is used to restrict competition between a business (the promisee) and an employee, contractor, or other business (the promisor) with which it deals.

Note that if the agreement occurs in a state that doesn't allow non-compete agreements, or if you choose to exclude the non-compete clause, then your agreement will then be titled as a "Non-Solicitation Agreement."

Non-Competition

The non-compete clause will prohibit the promisor from engaging in similar work as performed for the promisee. If the promisor works in an occupation or industry that requires having many clients at once (e.g. financial advisers or attorneys) or holds a relatively narrow expertise, courts may not enforce such a provision if it is an overly burdensome restriction on the promisor's ability to find work.

No matter what the promisor's occupation is, however, it is important that the non-compete clause is tailored to be as narrowly restrictive as possible. If the promisee operates in an industry that is rapidly changing, such as in the IT industry, then it will be hard to justify a non-compete term lasting longer than six months or a year. In most cases, if you include a non-compete term longer than two years, then you will be running a higher risk of a court someday shortening it down or invalidating it altogether.

Non-Solicitation

The non-solicitation provisions prevent the promisor from adversely interfering with any of the promisee's business relationships; for instance, by trying to lure away the promisee's own employees, customers, or vendors. The timeframe of the non-solicitation should be limited as much as possible so as to not be overly burdensome on the promisor while still protecting the promisee's interests. Courts generally accept anything between three months and two years depending upon what is reasonable under the circumstances.

It is usually a good idea to include these provisions unless you want to outline them in a separate agreement. However, these provisions will likely need to be negotiated between the parties upfront.

Dispute Resolution

It is recommended that you include an arbitration provision when prompted. This will require disputes to be settled through binding arbitration and avoid the time and expense of going through the formal court system.

Next, you will indicate which state's laws will govern the agreement. Usually, the promisee lists its principal place of business as the governing state or the state where the two parties are conducting business together.

Additional Terms

You can add additional terms and conditions as desired. This allows you complete flexibility to tailor the document to reflect the specific situation and true intent of the parties, but be sure to preview the agreement first so that you know what has already been included.

Executing Your Agreement

After you finish completing the form, executing your agreement is a simple matter of having both parties sign and date it. Make sure that both parties also receive a copy of the agreement.

Enforceability of Non-Compete Clauses by State

Your state law may limit the use of non-compete clauses. Review the list below to see whether non-competes are typically enforceable in your state.

  • Alabama – Allowed except for certain professionals, which are not subject to non-compete clauses ("professionals" is limited to the higher professions, such as doctors, veterinarians, accountants, etc.). Also, non-compete clauses can only be agreed to after employment has begun.
  • Alaska – Allowed.
  • Arizona – Allowed except for broadcasters and physicians, who are not subject to non-compete clauses.
  • Arkansas – Allowed.
  • California – Non-compete clauses are not enforceable under California law. However, LegalNature's non-compete agreement may still be used to prohibit the employee from soliciting customers and other employees away from the employer. Please note that non-solicitation of customers clauses are enforceable only where the customer identities are entitled to protection as trade secrets. California employers can still execute a non-disclosure agreement using LegalNature to prevent the disclosure or use of confidential information and trade secrets by employees.
  • Colorado – Allowed, but only as to executives and management personnel. As to lower level employees, LegalNature's non-compete agreement may still be used to prohibit an employee from soliciting other employees (but not customers) away from the employer. Non-compete agreements may be enforceable when they involve a contract for the purchase and sale of a business, a contract for the purchase and sale of business assets, or covenants by executives and management personnel and employees who constitute professional staff to executives and management personnel.
  • Connecticut – Allowed except for broadcasters and security guards, who are not subject to non-compete clauses.
  • Delaware – Allowed except for physicians, who are not subject to non-compete clauses.
  • District of Columbia – Allowed except for broadcasters, who are not subject to non-compete clauses.
  • Florida – Allowed except for mediators, who are not subject to non-compete clauses.
  • Georgia – Allowed.
  • Hawaii – Allowed.
  • Idaho – Allowed.
  • Illinois – Allowed except for broadcasters, government contractors, and physicians, who are not subject to non-compete clauses.
  • Indiana – Allowed.
  • Iowa – Allowed except for business franchisees that do not renew, who are not subject to non-compete clauses.
  • Kansas – Allowed except for some accountants, who are not subject to non-compete clauses.
  • Louisiana – Allowed except for auto salesmen and some real estate broker licensees, who are not subject to non-compete clauses. Non-compete and non-solicitation provisions are only valid if limited to specific parishes, municipalities, cities, or parts thereof, and the covenant does not exceed two years from termination of employment.
  • Maine – Allowed except for broadcast industry professionals, who are not subject to non-compete clauses.
  • Maryland – Allowed except for broadcasters, physicians, nurses, social workers, and psychologists, who are not subject to non-compete clauses.
  • Massachusetts – Allowed.
  • Michigan – Allowed.
  • Minnesota – Allowed.
  • Mississippi – Allowed.
  • Missouri – Allowed except for some secretaries and clerks, who are generally not subject to non-compete clauses.
  • Montana – Non-compete clauses are not enforceable except with the sale of a business or the dissolution of a partnership. Montana courts also do not generally uphold non-solicitation clauses. Still, Montana employers can still execute a non-disclosure agreement to prevent the disclosure or use of confidential information and trade secrets by employees.
  • Nebraska – Allowed.
  • Nevada – Allowed.
  • New Hampshire – Allowed.
  • New Jersey – Allowed except for in-house counsels and psychologists, who are not subject to non-compete clauses.
  • New Mexico – Allowed.
  • New York – Allowed.
  • North Carolina – Allowed.
  • North Dakota – Non-compete and non-solicitation clauses are not likely to be enforceable in North Dakota. The narrow exception is if these occur in connection with the sale of a business or the dissolution of a partnership. Therefore, you likely cannot use either of these two clauses unless this narrow exception would apply. Still, North Dakota employers can still execute a non-disclosure agreement to prevent the disclosure or use of confidential information and trade secrets by employees.
  • Ohio – Allowed.
  • Oklahoma – Non-compete clauses are not allowed. Note that Oklahoma law permits the use of non-solicitation agreements with employees or independent contractors, but does not permit prohibitions on the hiring or employment of such individuals by former employees or independent contractors. Still, Oklahoma employers can still execute a non-disclosure agreement to prevent the disclosure or use of confidential information and trade secrets by employees.
  • Oregon – Non-compete clauses are only permitted in certain statutorily enumerated circumstances, and are void unless in strict compliance with statutory requirements. Oregon law currently requires many employers to provide two weeks advance written notice or a bona fide advancement of the employee by the employer as a prerequisite to enforceability (see ORS 653.295(1)(a)). Non-compete clauses are only enforceable as to those engaged in administrative, executive, or professional work who earn a salary and are paid on a salary basis (see ORS 653.020). A non-compete cannot be enforced against an employee whose total gross income is less than the median income of a family of four in Oregon as determined by the latest statistics from the US Census Bureau ($67,315 for 2013 in Oregon) (see ORS 653.295(1)(d)). However, Oregon employers may now enter into an enforceable non-solicitation agreement at any time during the employment relationship with the employee. Still, Oregon employers can still execute a non-disclosure agreement to prevent the disclosure or use of confidential information and trade secrets by employees.
  • Pennsylvania – Allowed.
  • Rhode Island – Allowed.
  • South Carolina – Allowed.
  • South Dakota – Allowed.
  • Tennessee – Allowed except for some physicians, who may not be subject to non-compete clauses.
  • Texas – Allowed except for some physicians, who may not be subject to non-compete clauses.
  • Utah – Allowed.
  • Vermont – Allowed except for beauticians and cosmetologists (by their schools), who are not subject to non-compete clauses.
  • Virginia – Allowed.
  • Washington – Allowed except for broadcasters (in some circumstances), who are generally not subject to non-compete clauses.
  • West Virginia – Allowed.
  • Wisconsin – Allowed.
  • Wyoming – Allowed.

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