A non-compete agreement restricts someone from running or joining a competing business for a defined time, in a defined territory. The law tolerates these restrictions only when they protect something legitimate, like the goodwill of a business being sold or genuinely confidential relationships, and only when they are scoped tightly.
The legal landscape has shifted hard against broad non-competes, especially in employment. The version that still works is narrow: a specific activity, a real territory, a short clock, and real consideration. That is the version this template produces.
Where non-competes stand today
Employment non-competes are banned outright in California, Minnesota, North Dakota, and Oklahoma, and restricted by income thresholds or notice rules in states including Colorado, Illinois, Washington, and Massachusetts. The picture is very different for the sale of a business: even California enforces a non-compete given by the seller of a business as part of the sale, because the buyer is paying for goodwill the seller could otherwise walk away with. Before using this document for an employee, check your state's current rules; for a business sale or partner exit, the traditional analysis of reasonableness applies almost everywhere.
This area of law moves fast
Federal and state rules on employment non-competes have changed repeatedly in recent years. For an employment use, verify your state's current statute or have the agreement reviewed by a licensed attorney; sale-of-business covenants remain broadly enforceable.
The reasonableness test: scope, territory, time
- Scope: restrict the specific business the protected party actually does, not "any competitive activity". Courts strike covenants that would stop someone from earning a living in their field generally.
- Territory: the area where the company really operates or where the sold goodwill exists. A 25-mile radius for a local service business is defensible; a nationwide ban for a local business is not.
- Time: 6 to 24 months is the routinely accepted range; 3 to 5 years survives mainly in business sales where the buyer paid for long-term goodwill.
- Consideration: the restriction must be paid for: purchase price, engagement fees, or meaningful benefits, not just continued employment in many states.
This template also includes a reformation clause: if a court finds a restriction too broad, the parties ask the court to trim it to the enforceable maximum rather than void it, which many states permit.
Often, non-solicitation is the sharper tool
What most businesses actually fear is not competition in the abstract but a departing partner taking the clients and the staff. A non-solicitation covenant, included as an option in this template, targets exactly that: no poaching the customers the person dealt with, no recruiting the team. Courts enforce non-solicitation far more readily than non-competition, and in states hostile to non-competes it may be the only restriction that stands. Pair it with the confidentiality clause, which survives everywhere, and many businesses need nothing more.
Layer the protections
Non-compete, non-solicitation, and confidentiality are separable covenants: if one falls, the others stand. This template keeps them in separate paragraphs for exactly that reason.
Frequently asked questions
Are non-compete agreements enforceable?
It depends on the context and the state. Sale-of-business non-competes are enforced almost everywhere, including California. Employment non-competes are banned in several states and restricted in many others, and even where allowed they must be reasonable in scope, territory, and duration.
How long can a non-compete last?
For employment or contractor relationships, 6 to 24 months is the defensible range in most enforcing states. For the sale of a business, 3 to 5 years is common because the buyer paid for lasting goodwill.
What is the difference between non-compete and non-solicitation?
A non-compete restricts working in a line of business; a non-solicitation only forbids taking the company's clients and recruiting its staff. Non-solicitation is enforced more readily and is often the protection a business really needs.
Does a non-compete need separate payment to be valid?
It needs consideration: something of value exchanged for the restriction. In a business sale that is the purchase price; for contractors, the engagement fees. Several states no longer accept mere continued employment as sufficient for an existing employee.
What happens if someone violates the non-compete?
The protected party can seek an injunction ordering the violation to stop, plus damages for proven losses. This template includes the injunctive relief language courts look for, since money alone rarely undoes diverted customers.