Noncompete Clause

By Entrepreneur Staff


Noncompete Clause Definition:

Contracts between you and your employees in which your employees promise not to take what they learn while working for you and use it against you while working for a competitor. A typical noncompete agreement says the employee agrees not to work for rivals, solicit business from current clients, or otherwise compete with you for some period of time, such as a year, after leaving your company.

If you're worried about losing your key employees or trade secrets to a competitor, you might think about having those employees sign a noncompete agreement, which would prevent them from immediately leaving your employ and working for one of your rivals or using the information they gleaned on the job against you in some way. Although some companies have all their employees sign the same noncompete agreement when they join, this probably isn't the best way to go about it. General agreements signed by all employees tend not to hold up in court. So it is better to write noncompete agreements only for key employees. And make them specific.

You should also take care to learn and understand the laws regarding noncompete agreements in any state in which you do business. For example, California and Texas state laws tend not to support employers in disputes involving noncompete agreements.

Don't keep your noncompete agreements secret. Let employees know the company's policy. Let competitors know it, too, so they won't be tempted to raid your employees. A company that hires a rival's employee in violation of a noncompete agreement may be faced with a lawsuit. Finally, when employees are leaving the company, remind them of the noncompete agreement they signed and go over it with them to make sure they realize what restrictions they may have to observe.

More from Employee Management

Flexible Work Arrangements

Arrangements that allow employees to have a more variable schedule as opposed to complying with the standard 8-hour workday

See full definition

Goal Setting

Establishing short- or long-term objectives, usually incorporating deadlines and quantifiable measures

See full definition

Employee Handbook

A document that includes information that employees may need to refer to frequently in order to meet the terms and conditions of their employment

See full definition

Employment Contract

An agreement entered into between an employer and an employee at the time the employee is hired that outlines the exact nature of their business relationship, specifically what compensation the employee will receive in exchange for specific work performed

See full definition

Latest Articles

Resumes & Interviewing

Build a Better Resume with This $35 Subscription

AI Resume Builder promises to help you apply to jobs twice as fast.

Side Hustle

He Took His Side Hustle Full-Time After Being Laid Off From Meta in 2023 — Now He Earns About $200,000 a Year: 'Sweet, Sweet Irony'

When Scott Goodfriend moved from Los Angeles to New York City, he became "obsessed" with the city's culinary offerings — and saw a business opportunity.


I Got Over 225,000 Views in Just 3 Months With Short-Form Video — Here's Why It's the New Era of Marketing

Thanks to our new short-form video content strategy, we've amassed over 225,000 video views in just three months. Learn how to increase brand awareness through short-form video content.