Non-compete Clause

Summary

This is an employee non-compete clause (also known as a non-competition clause or covenant not to compete) intended for use in a broader agreement between the employer and employee. This clause includes practical guidance, drafting notes, and alternate clauses. IMPORTANT NOTE: On April 23, 2024, the FTC issued its final rule prohibiting new non-compete agreements with all workers. The rule provides that existing non-compete agreements with senior executives remain in force, and existing non-competes with all other workers are not enforceable. The term “senior executive” means a worker who makes more than $151,164 and who is in a “policy-making position.” The final rule is set to become effective 120 days after publication in the Federal Register, but it is being challenged in court, including by the U.S. Chamber of Commerce. For more information on the FTC’s final rule, see Fact Sheet on the FTC’s Noncompete Rule and FAQs on Federal Trade Commission's Rule Banning Worker Noncompete Clauses. This template is the template for our state non-competition clauses and has not been tailored for any jurisdiction. Use this template alone or customize it for one or more jurisdictions. For additional boilerplate terms to consider when incorporating a non-compete into an agreement, see Non-compete, Customer and Employee Non-solicitation, and Confidentiality Agreement. A traditional non-compete prohibits competing activities by an employee, typically for a specified period and often within a designated geographical area. Such covenants raise restraint-of-trade and other public policy concerns, and many states restrict their use by statute or common law. For a full listing of key content covering restrictive covenant considerations, see Restrictive Covenants Resource Kit. For additional information on non-competition agreements, see Non-compete Agreements: Key Negotiation, Drafting, and Legal Issues; Non-compete Agreements Checklist (Best Drafting Practices for Employers); Restrictive Covenant Basics, Including Adequate Consideration, Protectable Interests, Geographic and Time Restrictions, and Permissible Scope; Restrictive Covenants: Drafting Common Provisions; and Non-compete and Non-solicitation Agreements Checklist (Addressing Suspected Violations). For information on state laws concerning non-compete agreements, see Non-competes and Trade Secret Protection State Practice Notes Chart. For state law compliant non-compete agreements, see Non-competes and Trade Secret Protection State Expert Forms Chart.