Introduction
A non-compete agreement is a legal contract between an employee and employer that restricts the employee’s ability to work for a competing business or start a competing business within a certain geographic area and time period after leaving their current job. These agreements aim to prevent employees from taking confidential information or clients/customers to another company.
Filling out a non-compete agreement ensures both parties understand the restrictions and obligations involved. Properly completing the agreement requires attention to detail and an understanding of each section’s purpose.
This guide will walk through each section of a sample New York non-compete agreement and provide examples for filling out the various fields. Follow the steps closely, and elaborate on any explanations as needed to craft an agreement tailored to your specific situation.
Step 1: Purpose
The purpose section establishes the basic reason for the non-compete agreement. Fill in the name of your company and the employee’s name to clarify the parties involved.
Example: This agreement constitutes an agreement between ABC Company and John Smith regarding confidential information and trade secrets.
Step 2: Non-Compete/Disclosure
This section allows you to select which non-compete restrictions apply by checking the relevant boxes. Be as broad or narrow as desired in restricting future employment and business activities.
Some examples of potential restrictions include prohibiting working for competitors, soliciting customers, hiring employees, and more.
Example: Check the boxes for “Business Practices,” “Clients/Customers,” and “General Competitor(s)” to prevent the employee from engaging in similar business activities, contacting current/former clients, or working for a competitor.
Step 3: Time Period
The time period section establishes the duration non-compete restrictions apply for after employment ends. Typically, 6-12 months is reasonable in the state of New York. Fill in the number of months or years that limitations should apply.
Example: The recipient agrees to the restrictions stated in this agreement for the 12-month period following their termination of employment.
Step 4: Purchase Option
Including a purchase option allows the employee to buy out their non-compete restrictions for a specified amount of money if desired. Decide whether to provide this option and fill in the dollar amount if applicable.
Example: Check the first box and fill in $10,000 to allow the employee to pay that amount to void this agreement.
Step 5: Jurisdiction
The jurisdiction section establishes the geographical region the non-compete agreement covers. Fill in your state and perhaps the immediate surrounding area.
Example: The jurisdiction covered shall include New York state and northern New Jersey.
Step 6: Confidential Information
This section defines what constitutes “confidential information” covered under the agreement. While quite broad already, add any other proprietary company knowledge that requires protection.
Example: Add product formulas, manufacturing processes, and website code to the list of confidential information.
Step 7: Permitted Disclosure
Some disclosure exemptions are already listed, like information publicly available or required to be revealed by law. Review and add any other scenarios where disclosing confidential information would be allowable.
Example: Add an exemption allowing limited disclosure upon written approval by the CEO or President.
Step 8: Confidentiality
The confidentiality section emphasizes restrictions on sharing protected company information during employment and requires returning materials upon termination. No edits needed unless you want to customize confidentiality obligations further.
Step 9: Consultants and Employees Bound
This section binds those under contract with your company like consultants to the same non-disclosure standards as employees. Amend if you want to distinguish non-disclosure policies between different groups.
Example: Specify that temporary contractors are held to non-disclosure standards for 2 years rather than indefinitely.
Step 10: Return of Materials
The return of materials section mandates that any protected documents or records be returned upon termination of employment. Add specifics if desired regarding the return process.
Example: Specify that materials must be returned in-person within 5 days of termination for documentation purposes.
Step 11: Remedies
This section allows your company to recover losses from non-compete or confidentiality breaches. Specify any other remedies you would potentially pursue.
Example: Add that unofficial public use of protected information could result in criminal charges.
Step 12: Choice of Law
The choice of law section states New York law will govern disputes related to the agreement and consents to New York courts handling them. Amend appropriately if parties are based in different states.
Example: If your company is located in New York but employee in California, specify California law will apply instead.
Step 13: Entire Agreement
This simple section clarifies only what is defined in the document establishes terms, unless amendments are made in writing. No example needed, as this is straightforward.
And that covers the key sections! Be sure to sign, date, and have both parties provide printed names on the signature lines at the end to make the agreement official. Consulting a business lawyer when drafting a non-compete agreement is also highly recommended.
