A non-compete agreement establishes terms and conditions regarding an employee’s ability to work in an industry, or for a company’s competitors, once he or she terminates employment. A non-compete agreement might prohibit former employees from going to work for certain direct competitors for two years, or it could prevent them from working in the same industry for six months.
Written non-compete agreements are legal in most U.S. states. The specific areas, time period and regions covered by the non-compete, must be restricted. If the agreement includes too long of a time period, covers too wide a geographic area or is simply too broad, courts often side with the employee, stating that the right to earn a living outweighs an employer’s need for protection.
Employers often benefit from non-compete agreements because agreements can help them retain valuable employees, and protect trade secrets and other important information. Employees can benefit, as well, if they receive something in return for agreeing not to compete with the employer: a job, a promotion or a raise, for example.