Employment Non Compete Agreement Law and Legal Definition

A non-compete agreement is a promise by an employee not to compete with his or her employer for a specified time in a particular place. The agreement may cover such actions, among others, as opening a competing business or using customer information for business leads. A covenant not to compete, which is also known as a non-competition agreement, may be a clause in an employment agreement or a separate contract standing by itself.

Courts have traditionally frowned upon restrictions placed by employers on their employees' right to find and make a living. The longer the non-compete time period, the closer scrutiny the court will give the agreement. The length of time that an agreement not to compete can be enforced depends on the facts and circumstances of the individual case. However, courts will enforce non-competition agreements if:

  • the employer proves that it has a legitimate business interest to protect by restricting its employees' right to compete against it;
  • the restriction on the employee's right to compete is no greater than that necessary to protect the employer's business interest; and
  • the covenant not to compete is supported by consideration, meaning that the employee received something in exchange for it.

Non-compete agreements entered into by the seller of a business and made a part of the sales transaction are more likely to be enforced than those entered into between an employer and an employee because of the greater equality in bargaining positions between a seller and buyer. A non-compete agreement signed by an existing employee is more likely to be upheld if signed in conjunction with an offer of a raise, bonus, or promotion. A non-compete agreement signed by a new employee is generally found to supported by consideration in the form of the job offer.