Non-Compete Agreement

What Is a Non-Compete Agreement? A non-compete agreement (also called a covenant not to compete or restrictive covenant) is a contract where one party, typically an employee or business seller, agrees to refrain from starting or working for a competing business within certain geographical and time limitations. These agreements protect legitimate business interests such as trade secrets, customer relationships, and specialized training investments. ## Enforceability Requirements Courts evaluate non-compete agreements based on: - Whether the restriction protects a legitimate business interest - Whether the geographic scope is reasonable - Whether the time limitation is reasonable (typically 6 months to 2 years) - Whether the restriction imposes undue hardship on the restricted party - Whether adequate consideration was provided ## State Variations Enforceability varies dramatically by state. California generally prohibits non-compete agreements for employees. Other states like Texas, Florida, and New York enforce them with varying degrees of scrutiny. Some states allow courts to modify overly broad restrictions (blue-pencil doctrine), while others void the entire agreement if any part is unreasonable.