Template · Offers and pre-employment
Non-compete agreement
In short
A non-compete agreement template sets out when and where an employee may not work for a competitor after leaving. This version includes a narrowly drawn non-compete, customer and employee non-solicitation clauses, confidentiality, consideration and a severability clause. Enforceability depends heavily on state law, so use it as a starting draft for counsel, not as a finished contract.
Employee Non-Competition and Non-Solicitation Agreement template
Employee Non-Competition and Non-Solicitation Agreement
Template only. Restrictive covenants are banned or limited in many states and countries, often with pay thresholds, notice periods and required consideration. Have an employment lawyer in the employee's work state review this agreement before use.
Parties
This Non-Competition and Non-Solicitation Agreement (the "Agreement") is entered into on [Date] between [Company Legal Name], a [State] [corporation / LLC] with its principal office at [Address] (the "Company"), and [Employee Full Name], residing at [Employee Address] (the "Employee").
1. Background and consideration
The Employee is [being offered employment / employed] as [Job Title]. In this role the Employee will have access to the Company's confidential information, customer relationships and goodwill. In exchange for the Employee's promises in this Agreement, the Company provides [the offer of employment / a one-time payment of $[Amount] / eligibility for [promotion, bonus or equity]], which the Employee acknowledges is adequate consideration. [If required by state law: The Company provided this Agreement to the Employee on [Date], at least [14] days before it must be signed, and the Employee has the right to consult a lawyer before signing.]
2. Non-competition
During employment and for [6 / 12] months after employment ends for any reason (the "Restricted Period"), the Employee will not, within [Geographic Area, e.g. 50 miles of any Company location where the Employee worked in the last 12 months of employment], perform services that are the same as or substantially similar to those the Employee performed for the Company in the last [12 / 24] months of employment, for any business that provides [describe competing products or services specifically] (a "Competing Business"). This section does not prevent the Employee from holding up to 2% of the stock of a public company, or from working for a Competing Business in a role unrelated to the Employee's work at the Company.
3. Non-solicitation of customers
During the Restricted Period, the Employee will not, directly or through others, solicit or accept business from any customer or prospective customer of the Company with whom the Employee had material contact, or about whom the Employee received confidential information, in the last [12] months of employment, for the purpose of providing products or services that compete with the Company's.
4. Non-solicitation of employees
During employment and for [12] months afterward, the Employee will not directly solicit or encourage any Company employee or contractor with whom the Employee worked to leave the Company. General job advertisements not targeted at Company employees are not a breach.
5. Confidential information
The Employee will not use or disclose the Company's confidential information, including customer lists, pricing, business plans, financial information and trade secrets, except as required for the Employee's job. This obligation continues after employment ends. Nothing in this Agreement prevents the Employee from reporting possible violations of law to a government agency, discussing wages or working conditions as protected by law, or making disclosures protected under the Defend Trade Secrets Act.
6. Garden leave or post-employment payment (optional)
[If the Company chooses to enforce Section 2 after employment ends, the Company will pay the Employee [50%] of the Employee's highest base salary in the last two years of employment during the Restricted Period, paid on regular payroll dates. The Company may waive Section 2 in writing within [10] days after employment ends, in which case no payment is due.]
7. Notice to new employers
During the Restricted Period, the Employee will tell any prospective employer about this Agreement before accepting an offer, and the Company may provide a copy of Sections 2 to 4 to that employer.
8. Remedies
The Employee agrees that a breach of this Agreement could cause the Company harm that money alone cannot fix, and that the Company may seek an injunction in addition to any other remedy available by law. [If permitted by state law: The Restricted Period will be extended by any period during which the Employee is in breach.]
9. Severability and modification
If a court finds any part of this Agreement unenforceable, the remaining parts stay in effect, and the court may modify the unenforceable part to the minimum extent necessary to make it enforceable, where the law allows.
10. Governing law and general terms
This Agreement is governed by the laws of the state where the Employee primarily works at the time employment ends, [State]. It does not change the at-will nature of the Employee's employment. This Agreement is the full agreement on its subject and can be changed only in writing signed by both parties.
Signatures
- Employee signature
- Employee printed name
- Date
- Company representative signature
- Name and title
- Date
How to use this template
- Decide whether the role actually needs a non-compete, or whether confidentiality and non-solicitation clauses alone protect the business.
- Check the law of the state where the employee will work, including bans, salary thresholds, notice periods and consideration rules.
- Narrow the restricted activities, geography and duration to what this specific role could actually harm.
- Fill in the placeholders and remove the optional clauses that do not apply, then have counsel review the draft.
- Give the agreement to the candidate with the offer, not on the first day, and allow any review period the state requires.
- Store the signed agreement in the personnel file and review it again if the employee changes role or state.
What a non-compete agreement covers
A non-compete restricts an employee from working for a competitor, or starting a competing business, for a set time after leaving and within a set area. In practice most agreements bundle it with two softer restrictions: a customer non-solicitation clause and an employee non-solicitation clause. People search for these together as a restrictive covenant agreement.
The softer clauses are where most of the real protection is. A sales manager leaving to join a competitor is rarely the problem; taking the top 20 accounts with them is. Courts are generally more willing to enforce a well-drafted customer non-solicitation clause than a broad ban on working in the industry. Confidentiality obligations can also sit in a separate employee non-disclosure agreement.
State law decides almost everything
There is no single US rule. California, North Dakota, Oklahoma and Minnesota (for agreements signed from July 1, 2023) prohibit most employee non-competes. California also makes it unlawful to require employees to sign a void non-compete and required employers to notify affected current and former employees by February 14, 2024. A growing group of states, including Washington, Oregon, Illinois, Colorado, Maine and others, ban non-competes below set earnings thresholds, and several require advance notice or extra consideration. Massachusetts limits most non-competes to 12 months and requires garden leave pay or other agreed consideration.
At the federal level, the FTC issued a rule in 2024 that would have banned most non-competes, but a federal court set it aside before it took effect. The FTC can still challenge specific agreements it considers unfair. Outside the US, rules differ again: some countries require paid restriction periods, others treat post-employment non-competes as largely unenforceable. This page is informational; get advice for each state or country you employ in.
Who should and should not sign one
Use non-competes sparingly. They make sense for senior leaders with strategy knowledge, salespeople who own key client relationships and a small set of technical staff with real trade secrets. They make no sense for hourly warehouse associates, contact center agents, cashiers or most frontline roles. Several states now explicitly ban them for low-wage workers, and even where legal, they make high-volume hiring harder: candidates read "non-compete" in an offer packet for a $17-an-hour job and walk.
For staffing agencies, non-competes on temporary workers are especially risky. A client relationship is better protected through the agency's contract with the client, such as a conversion fee, than through the worker's paperwork.
Drafting for enforceability
Where non-competes are allowed, courts usually ask whether the restriction protects a legitimate business interest and is reasonable in time, geography and scope. Practical guidelines:
- Duration. Six to 12 months is common and easier to defend. Two years invites a challenge.
- Geography. Tie it to where the employee actually worked or had customers, not "the United States."
- Activity. Restrict the work they did, not every job at a competitor.
- Consideration. In some states continued employment is not enough for a current employee; offer something new.
- Timing. Present it with the offer. A non-compete handed over on day one, after the person resigned their last job, looks coercive and fails in some states.
If you include garden leave pay, the restriction becomes easier to enforce and fairer to the employee.
Common mistakes
- Using one company-wide template for every role and every state.
- Copying a clause from another company without checking which state law it was written for.
- Forgetting to update the agreement when an employee relocates, since many statutes apply based on where the employee works.
- Sending cease-and-desist letters for agreements that are void in the employee's state, which can itself create liability.
- Folding the non-compete into the employment contract template so that an unenforceable clause muddies the rest of the contract. A separate agreement with a severability clause is cleaner.
Frequently asked questions
Are non-compete agreements enforceable?
It depends on the state or country. Some states ban most employee non-competes, others restrict them by salary or require notice and consideration, and the rest enforce them only if they are reasonable in time, geography and scope and protect a legitimate business interest.
What is a reasonable non-compete clause?
Typically one lasting 6 to 12 months, limited to the area where the employee worked or had customers, and restricted to work similar to what they did, supported by real consideration and protecting confidential information or customer relationships.
What is the difference between a non-compete and a non-solicitation agreement?
A non-compete restricts working for a competitor at all. A non-solicitation agreement only restricts approaching the former employer's customers or employees. Non-solicitation clauses are narrower and generally easier to enforce.
What is a restrictive covenant agreement?
It is an agreement containing one or more post-employment restrictions, such as non-competition, customer non-solicitation, employee non-solicitation and confidentiality obligations. This template is a restrictive covenant agreement.
Did the FTC ban non-compete agreements?
The FTC issued a rule in 2024 to ban most non-competes, but a federal court set it aside before it took effect, so it is not in force. State laws still apply, and the FTC can act against specific agreements.
Can you require hourly employees to sign a non-compete?
Many states now ban non-competes for workers below set earnings thresholds, and even where allowed they are hard to justify for frontline roles. Confidentiality and non-solicitation terms are usually the better tool.