Drafting a Non-Compete Agreement

June 2nd, 2015

If you are starting your own business, depending on the nature of it, you may consider having your employees sign a non-compete clauses.  This can either be included in the contract or presented separately.  This would prevent an employee from leaving your business, and starting a similar one in competition with yours.  Generally, a non-compete clause states that the employee will not enter into a competing business for a certain period of time, or within a certain geographical boundary, after leaving the company.  This is especially important if you are looking to protect trade secrets, or inside knowledge of the company.

For a non-compete clause to be valid, it must:

  • Be supported by consideration
  • Be reasonable in the scope of the duration and geographic boundaries
  • Protect a legitimate business interest

Consideration                                                                                                                                   

Any contract requires consideration to be valid.  Consideration is usually monetary.  In this case, the employer’s consideration is offering the prospective employee a job.  In the event that the non-compete clause is presented when the employee has already been working at the company for a period of time, the consideration required would usually be in the form of a raise or promotion.

Reasonableness                                                                                                                                                                                       

It is particularly important that a non-compete agreement be reasonable.  A court may find that your agreement is not enforceable if the geographic boundary is too wide, or the duration is too long.  In one case, a court found that the non-compete clause in a hair stylist’s contract was not enforceable due to the high demand for hair stylists in that area.

Legitimate Business Interest                                                                                                                                                   

A non-compete clause can be specifically drafted to fit the needs of your business.  However, it is generally unnecessary to go into great detail regarding the particular trade secrets you wish to protect, or from which competitors, etc.  However, you do need a good reason for asking an employee to sign such an agreement.  If you later have to litigate, a judge will take into consideration whether you had a legitimate reason for asking an employee to sign it.

If you are drafting a non-compete clause for your employees, it is best to contact an attorney who has experience drafting and handling contractual matters to ensure that your contracts are fair and enforceable.  Call Bellavia, Blatt & Crossett, P.C. at (516) 873-3000 or (631) 224-7000.

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