Non-Compete Agreement

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Glossary of the most common HR terms and acronyms to assist professionals navigating the ever-growing and ever-changing world of HR terminology.

Non-Compete Agreement

What is a Non-Compete Agreement?

When organizations use non-compete agreements, they often refer to written contracts between employees and employers that require a signature. In addition, these contracts state the employee can’t enter into competition with the employer when the employee leaves the company.

Why do employers use non-compete agreements?

When an employee and employer relationship ends, non-compete agreements tend to be a requirement of employers. The goal of the agreement is to prevent competition against them in the employee’s next position, for example:

  • Working for a competitor in the same market.
  • Starting up another business in the same field.
  • Recruiting the company’s employees to leave with them. 

Employers may use these agreements to protect themselves from previous employees revealing:

  • Company secrets.
  • Private company information.
  • Company operations.
  • Client information.
  • Company pricing.
  • Company strategies, etc.

How long are non-compete agreements in effect?

Non-compete agreements typically last a specific time frame following the employment relationship termination. These dates are typically set within the agreement.

What’s included in a non-compete agreement?

A non-compete agreement has to include certain information in order for it to be legally binding. This includes: 

  • Effective dates.
  • Reasons for the written agreement.
  • Dates for when the employee will be barred from working in a competitive sense. 
  • Details as to how the non-competing party will receive compensation for agreeing to the terms. 

Related Terms: Floating Holidays

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