A non-compete agreement legally binds a current or former employee from competing with an employer for some period of time after employment ceases. Under such an agreement, the employee must not reveal any trade secrets learned during employment. These contracts outline how long the employee must refrain from working with a competitor, the geographic location, and/or the market. Some states, like California, refuse to enforce non-compete agreements. Non-compete agreements can prevent workers from getting a job in their field if they leave a position.
Non-compete agreements are signed when the relationship between employer and employee begins. They give the employer control over specific actions of the employee even after that relationship ends.
Some of the terms of the contract may include the length of time the employee is bound to the non-compete agreement, the geographic location, and/or market. These agreements may also be called a "covenant not to compete" or a "restrictive covenant."
Non-compete ensure the employee will not use information learned during employment to start a business and compete with the employer once work is over. It also ensures the employer keeps its place in the market.
Non-compete agreements are common in the media. A television station might have legitimate concerns that a popular meteorologist may siphon viewers away if they began working for a rival station in the same area. In most jurisdictions, this would be considered a reasonable cause to sign a non-compete agreement.
Non-compete is also common in the information technology (IT) sector, where employees are often charged with proprietary information that may be deemed valuable to a company. Other places where these agreements are found include the financial industry, the corporate world, and manufacturing.
Most states adopt some sort of standard that a non-compete agreement must not be egregious in the length of time or geographic scope and shouldn't meaningfully restrict a worker's ability to find employment. However, jurisdictions differ widely in interpreting what terms of a non-compete agreement would be overly onerous.
Non-compete agreements are distinct from non-disclosure agreements (NDAs), which generally don't prevent an employee from working for a competitor. Instead, NDAs prevent the employee from revealing information the employer considers to be proprietary or confidential, such as client lists, underlying technology, or information about products in development.
A non-compete agreement may not daunt employees who plan on staying put in a job or who prize being trusted with valuable information. But employees who sign non-compete agreements may find themselves leaving their industry entirely if it is too hard to find a new job after signing one.