Non-Compete Agreement

Non-Compete Agreement: Protect Your Business After Someone Leaves

A non-compete agreement (also called a restrictive covenant agreement) stops an employee, contractor or another business from competing with your business for a set period, in a set area, after your relationship ends. It can also stop them approaching your customers or poaching your staff. Robot Lawyer drafts the agreement from your answers, for the law of the country or state you choose. On the Verified plan, a legal professional checks it before you sign.

CONTENTS

What Is a Non-Compete Agreement?

When someone leaves a business, they take their knowledge, skills and relationships with them. A non-compete agreement protects the business's legitimate interests, such as its customer connections, confidential information and a stable workforce, by restricting what the person can do for a limited time afterwards.

Most legal systems treat non-compete restrictions with caution because they limit a person's ability to earn a living. As a rule, a restriction is only enforceable if it protects a genuine business interest and goes no further than reasonably necessary. That's why the restricted activities, the area and the length of the restriction should be as narrow as your business really needs.

When Do You Need One?

• Senior or key employees
  People with access to customer relationships, pricing, strategy or trade secrets.
• Contractors and consultants
  Freelancers who work closely with your clients or know how your business operates.
• Selling a business
  Restricting a seller from setting up a competing business straight after the sale.
• Business partners
  Restricting a partner, distributor or another company from competing with a joint project.
• Alongside other agreements
  Supporting the restrictions in an employment contract or a consultancy agreement.

What's Included in Your Agreement?

• The parties and relationship
  Who is restricted, who is protected, and the relationship between them.
• Protected interests
  The legitimate business interests the restrictions protect.
• Restricted activities
  The business activities the restricted party can't carry on.
• Named competitors
  Any specific competitors the restricted party must not work for.
• Area and duration
  The geographical area and how long the restriction lasts.
• Non-solicitation of customers
  How long the restricted party can't approach the business's customers or clients.
• No poaching of staff
  How long the restricted party can't approach the business's employees.
• Payment
  Any payment for agreeing to the restrictions.
• Severability
  Wording so that, if one restriction goes too far, the rest can still apply.

Making Your Restrictions Enforceable

Courts tend to uphold restrictions that are tailored to the person and the business. Keep these points in mind:

• Be specific
  Describe the activities you want to restrict, rather than any work in your sector.
• Keep it short
  Short periods, such as 3 to 12 months, are far more likely to be upheld than long ones.
• Limit the area
  Match the area to where the business actually trades and where the person worked.
• Think about the person's role
  A junior employee usually justifies narrower restrictions than a senior manager or a business seller.
• Use separate restrictions
  Non-solicitation and no-poaching clauses are often easier to enforce than a full non-compete.

How It Works on Robot Lawyer

1. Answer the questions
   Tell us who is restricted, the business being protected, the restricted activities, the area and how long each restriction should last.
2. Generate your agreement
   We draft a clear agreement with separate, severable restrictions under the law you choose.
3. Get it verified
   On the Verified plan, a qualified legal professional checks your agreement within 24 hours and makes amendments where needed. See how our documents are verified.
4. Sign it
   Both parties sign the agreement, ideally before the relationship starts or in return for a benefit.

How It Works in Different Countries

• UK
  Restrictions are enforceable only if they protect a legitimate business interest and go no further than reasonably necessary. The government has consulted on limiting employee non-competes, so check the current position.
• United States
  The rules vary widely by state. California bans most non-competes, and many other states limit them for lower-paid workers or require advance notice or extra payment. Federal rules have also been the subject of litigation, so check the current position.
• Ireland
  Courts apply a reasonableness test and tend to read restrictions narrowly, especially for employees.
• Canada
  Courts are reluctant to enforce employee non-competes, and Ontario bans most of them for employees. Non-solicitation clauses are often preferred.
• Australia
  Restraints must be reasonable, and New South Wales uses specific legislation to read them down. Federal law banning non-competes for many lower-paid employees is due to take effect, so check the current position.

These notes are general and the law in this area is changing. Check the current rules before relying on a restriction.

Non-Compete Agreement FAQs

Are non-compete agreements enforceable?

Often, but only if they are reasonable. Courts look at the business interest protected, the activities restricted, the area and how long the restriction lasts. Some places, such as California, don't enforce most non-competes at all.

How long can a non-compete last?

There is no fixed limit in most places, but shorter is safer. For employees, 3 to 12 months is common. Longer periods are more likely to be upheld when someone sells a business.

Does the restricted party have to be paid?

Not always. In some countries and states, a non-compete must be supported by payment or another benefit, and in some it must be paid for while it applies. Your agreement records any payment you agree.

What's the difference between non-compete and non-solicitation?

A non-compete stops someone working in a competing business at all. Non-solicitation only stops them approaching your customers or staff, so it is a lighter restriction and often easier to enforce.

Can I use this for an employee who has already started?

Yes, but in many places a new restriction for an existing employee needs to be given in return for something, such as a pay rise, bonus or promotion.

Can I use this agreement outside the UK?

Yes. Your agreement is drafted under the law of the country or state you choose. Our lawyers are qualified in England and Wales and check documents for good practice, clear formatting and the law of England and Wales. They are not qualified in other countries' law, so if your agreement is governed by another country's law, we recommend having a local lawyer check it too.

Create a Non-Compete Agreement

Protect your customers, staff and know-how with restrictions that fit your business. You can start with a 7-day free trial. See our pricing for the plans. Related documents: Non-Disclosure Agreement, Contract of Employment, Consulting Agreement and Share Purchase Agreement.