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Non-Compete Agreement

Non-Compete Agreement

This Non-Compete Agreement (the "Agreement") is entered into as of [Effective Date] (the "Effective Date"), by and between:

[Employer Name], with a principal mailing address at [Address], [City], [State] [ZIP Code] (hereinafter referred to as the "Employer"); and

[Employee Name], with a mailing address at [Address], [City], [State] [ZIP Code], currently holding the position of [Job Title] (hereinafter referred to as the "Employee").

The Employer and the Employee are hereinafter collectively referred to as the "Parties" and individually as a "Party."

RECITALS

WHEREAS, the Employer is engaged in a business that involves proprietary information, trade secrets, confidential business strategies, client relationships, and specialized knowledge;

WHEREAS, the Employee has been or will be employed by the Employer in a capacity that provides the Employee with access to the Employer’s confidential information, trade secrets, client lists, business methods, and other proprietary materials;

WHEREAS, the Employer has a legitimate business interest in protecting its confidential information, goodwill, client relationships, and competitive position in the marketplace;

WHEREAS, the Employee acknowledges that the restrictions contained in this Agreement are reasonable and necessary to protect the Employer’s legitimate business interests;

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1. CONSIDERATION

In exchange for the Employee’s agreement to the restrictive covenants contained herein, the Employer shall provide the Employee with the following consideration: [Consideration]. The Employee acknowledges that this consideration is adequate and sufficient to support the obligations and restrictions set forth in this Agreement.

2. NON-COMPETE COVENANT

2.1 Restriction Period. The Employee agrees that for a period of [Duration] following the termination of the Employee’s employment with the Employer, whether such termination is voluntary or involuntary, with or without cause (the "Restriction Period"), the Employee shall not, directly or indirectly, engage in any of the restricted activities described in this Section.

2.2 Geographic Scope. The restrictions set forth in this Agreement shall apply [Geographic Scope] (the "Restricted Territory").

2.3 Restricted Activities. During the Restriction Period and within the Restricted Territory, the Employee shall not, directly or indirectly, on the Employee’s own behalf or on behalf of any other person or entity:

(a) Engage in, own, manage, operate, control, be employed by, consult for, participate in, or be connected in any manner with any business or enterprise that involves [Restricted Activities];

(b) Assist any person or entity in engaging in any of the activities described in subsection (a) above within the Restricted Territory;

(c) Have any ownership interest in any business or enterprise that competes with the Employer within the Restricted Territory, except for the passive ownership of no more than five percent (5%) of the outstanding shares of a publicly traded company.

3. CONFIDENTIALITY

The Employee acknowledges that during the course of employment, the Employee has had and will continue to have access to the Employer’s confidential and proprietary information, including but not limited to trade secrets, client lists, financial data, business strategies, marketing plans, product development information, and other materials not generally known to the public (collectively, "Confidential Information"). The Employee agrees not to use or disclose any Confidential Information at any time during or after the termination of employment, except as required in the performance of the Employee’s duties for the Employer or as required by law.

4. REMEDIES

The Employee acknowledges that a breach of this Agreement would cause irreparable harm to the Employer for which monetary damages alone may not be an adequate remedy. In the event of a breach or threatened breach of this Agreement, the Employer shall be entitled to seek [Remedies], in addition to any other remedies available at law or in equity. The pursuit of any remedy shall not constitute a waiver of any other right or remedy the Employer may have.

In the event that the Employer prevails in any legal proceeding to enforce this Agreement, the Employee shall be responsible for the payment of all reasonable attorneys’ fees and court costs incurred by the Employer in connection with such enforcement.

5. REASONABLENESS OF RESTRICTIONS

The Employee acknowledges and agrees that the restrictions contained in this Agreement, including the duration, geographic scope, and scope of restricted activities, are reasonable and necessary to protect the Employer’s legitimate business interests, including its Confidential Information, goodwill, and client relationships. The Employee further acknowledges that these restrictions will not impose an undue hardship on the Employee and will not prevent the Employee from earning a livelihood.

6. SEVERABILITY

If any provision of this Agreement, or the application thereof to any person or circumstance, is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall continue in full force and effect. In the event that any restriction contained herein is found to be unreasonable or overly broad as to duration, geographic scope, or scope of restricted activities, the Parties agree that the court shall have the authority to reform such restriction to the minimum extent necessary to make it valid and enforceable, and the restriction as so reformed shall be binding upon the Parties.

7. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of [Governing Law State], without regard to its conflict of laws principles. Any legal action or proceeding arising out of or relating to this Agreement shall be brought exclusively in the state or federal courts located in the State of [Governing Law State], and each Party hereby consents to the personal jurisdiction of such courts.

8. ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, warranties, commitments, offers, and agreements, whether written or oral, relating to the same subject matter. No other promises, statements, or inducements have been made to the Employee other than those contained in this Agreement.

9. AMENDMENTS

This Agreement may not be amended, modified, or supplemented except by a written instrument signed by both Parties. No waiver of any provision of this Agreement shall be effective unless made in writing and signed by the waiving Party.

10. ASSIGNMENT

The Employee may not assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the Employer. The Employer may assign this Agreement to any successor entity, whether by merger, acquisition, reorganization, or sale of all or substantially all of the Employer’s assets, without the Employee’s consent.

IN WITNESS WHEREOF, the Parties have executed this Non-Compete Agreement as of the Effective Date first written above.

EMPLOYER:

Name: [Employer Name]

Title: Authorized Representative

Date: [Employer Sign Date]

EMPLOYEE:

Name: [Employee Name]

Title: [Job Title]

Date: [Employee Sign Date]

Party 1

________________

Signature

Date: ________________

Party 2

________________

Signature

Date: ________________

Maintained by Vladislav Sergienko, Founder·Template last modified: ·Report an error

What Is a Non-Compete Agreement?

A Non-Compete Agreement in the United States limits a party's ability to work for or start a competing enterprise after the relationship ends.

The enforceability of non-compete agreements varies dramatically across states, making jurisdiction one of the most important considerations. California (Business and Professions Code Section 16600) bans non-competes for employees almost entirely, with narrow exceptions for business sale contexts. Oklahoma (15 O.S. Section 219A) and North Dakota (Century Code Section 9-08-06) similarly prohibit employee non-competes. In contrast, states like Florida (Section 542.335) explicitly authorize non-competes and provide a statutory framework with presumptively reasonable time periods. The FTC proposed a nationwide ban on non-compete clauses in 2024, though its implementation has faced legal challenges.

Most states that permit non-competes apply a reasonableness test examining three factors: the duration of the restriction (typically one to two years), the geographic scope (limited to areas where the employer actually conducts business), and the scope of restricted activities (narrowly tailored to the employee's actual role). Courts in many jurisdictions, including Texas, apply a reformation doctrine that allows judges to modify overly broad non-competes to reasonable terms rather than invalidating them entirely. Other states, like Virginia, follow a strict construction approach where overbroad agreements are voided completely.

Non-competes are distinct from non-solicitation agreements, which only restrict contacting specific clients or employees, and non-disclosure agreements, which protect confidential information. While all three are restrictive covenants, non-competes impose the broadest restriction by prohibiting the individual from working in the same industry or field altogether.

When Do You Need a Non-Compete Agreement?

A Non-Compete Agreement is necessary in several specific business situations. An employer is hiring a senior executive, sales director, or key technical employee who will gain access to the company's most sensitive trade secrets, strategic plans, customer relationships, and proprietary methodologies. The non-compete protects against the employee joining a direct competitor and using that knowledge to divert business.

A business owner is selling their company and the buyer requires the seller to agree not to open a competing business in the same market for a defined period. Under the Restatement (Second) of Contracts Section 188, courts consistently enforce non-competes in business sale contexts with greater latitude on scope and duration than employment non-competes because the seller receives substantial consideration (the purchase price) in exchange for the restriction.

A company is investing significant resources in specialized training, certifications, or professional development for an employee and needs assurance that the employee will not immediately take those skills to a competitor. A medical practice, law firm, or professional services firm is bringing on an associate or partner who will develop close relationships with the firm's client base and must be restricted from taking those clients to a competing practice upon departure.

A franchisor is granting franchise rights and must prevent the franchisee from operating a competing business during the franchise term and for a reasonable period after termination to protect the brand and territorial exclusivity. A technology company is engaging a contractor who will develop proprietary systems and must prevent the contractor from building identical solutions for competing clients.

What to Include in Your Non-Compete Agreement

An enforceable Non-Compete Agreement requires careful drafting of several essential elements, with each provision directly impacting the agreement's enforceability in court. The restricted activities clause must precisely define what competitive activities are prohibited, limited to the specific industry, business line, or role that the employee actually performed. Courts routinely strike down agreements that broadly prohibit working in an entire industry when the employee's role was limited to a specific function within that industry.

The geographic scope must be reasonably limited to the territory where the employer actually conducts business or where the employee had direct involvement. A nationwide restriction for a regional sales representative would likely be deemed unreasonable, while the same scope might be appropriate for a C-suite executive of a national company. Some states, including Texas under Business and Commerce Code Section 15.50, allow courts to reform geographic scope rather than invalidate the entire agreement.

The duration must be reasonable, with most courts accepting one to two years for employment contexts and up to five years for business sale non-competes. Under Florida Statute Section 542.335, restrictions of six months or less are presumptively reasonable, while those exceeding two years carry a presumption of unreasonableness that the employer must rebut.

Consideration is a critical enforceability factor. For new employees, the job itself typically constitutes adequate consideration. For existing employees asked to sign a non-compete mid-employment, additional consideration such as a raise, promotion, bonus, or continued employment must be provided, with requirements varying by state. The forms-legal.com Non-Compete Agreement template includes a severability clause allowing courts to enforce remaining provisions if one is struck down, a choice of law provision specifying the governing jurisdiction, and a remedies clause establishing the right to injunctive relief and liquidated damages. Garden leave provisions, requiring the employer to pay the employee's salary during the restriction period, significantly increase enforceability across all jurisdictions.

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Reference this free template in an article, syllabus, or research note:

APA

Forms Legal. (2026). Non-Compete Agreement (United States) [Legal document template]. Forms Legal. https://forms-legal.com/usa/business/contracts/non-compete-agreement

MLA

"Non-Compete Agreement (United States)." Forms Legal, 2026, https://forms-legal.com/usa/business/contracts/non-compete-agreement.

BibTeX
@misc{formslegal-non-compete-agreement,
  author       = {{Forms Legal}},
  title        = {Non-Compete Agreement (United States)},
  year         = {2026},
  howpublished = {\url{https://forms-legal.com/usa/business/contracts/non-compete-agreement}},
  note         = {Free legal document template. Based on Restatement (Second) of Contracts § 188}
}

Frequently Asked Questions

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Based on Restatement (Second) of Contracts § 188 — Template last modified June 2026

This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer

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