Non-Competition Agreement Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Non-Competition Agreement, written in plain English, along with examples of how it is used.
What is Non-Competition Agreement?
Contract between an employer and employee which prevents the employee from competing against his former employee for a certain period of time upon termination of his/her job. For instance, a salesperson may sign a non-competition agreement which would prevent them from using business contacts gained during employment at their former company.
History and Meaning of Non-Competition Agreement
A non-competition agreement, also known as a covenant not to compete, is a legal agreement between an employer and employee. It prohibits the employee from competing against their former employer for a specific period after the termination of employment. This agreement is used by employers to prevent their employees from working for their competitors and gaining an unfair advantage. The concept of non-compete agreements originated in the United States in the 19th century and has since then been widely used across various industries.
In general, a non-competition agreement should be reasonable in terms of its duration and scope, and the employee should receive some form of consideration in return for signing it. The duration of the agreement is typically not more than 1-2 years, and the scope is limited to a specific geography or industry. However, the terms can vary widely depending on the nature of the job and the employer's needs.
Examples of Non-Competition Agreement
A software engineer signed a non-compete agreement with his employer, which stated that he could not work for a competitor within a radius of 50 miles for two years after leaving the company.
A salesperson signed a non-compete agreement that prohibited her from soliciting the company's clients for two years following her departure.
A research scientist signed a non-compete agreement which prohibited him from working in the same field for three years after resigning from his company.
Legal Terms Similar to Non-Competition Agreement
- Non-Disclosure Agreement (NDA) - an agreement in which one party agrees not to share confidential information with others.
- Confidentiality Agreement - a contract in which the parties agree not to disclose specific information to others.
- Trade Secret - valuable and confidential information that is not generally known and gives a business a competitive advantage.