Non-Compete. During the term of this Agreement and for a period of twelve (12) months following the Director’s removal or resignation from the Board of Directors of the Company or any of its subsidiaries or affiliates (the “Restricted Period”), the Director shall not, directly or indirectly, (i) in any manner whatsoever engage in any capacity with any business competitive with the Company’s current lines of business or any business then engaged in by the Company, any of its subsidiaries or any of its affiliates (the “Company’s Business”) for the Director’s own benefit or for the benefit of any person or entity other than the Company or any subsidiary or affiliate; or (ii) have any interest as owner, sole proprietor, stockholder, partner, lender, director, officer, manager, employee, consultant, agent or otherwise in any business competitive with the Company’s Business; provided, however, that the Director may hold, directly or indirectly, solely as an investment, not more than one percent (1%) of the outstanding securities of any person or entity which is listed on any national securities exchange or regularly traded in the over-the-counter market notwithstanding the fact that such person or entity is engaged in a business competitive with the Company’s Business. In addition, during the Restricted Period, the Director shall not develop any property for use in the Company’s Business on behalf of any person or entity other than the Company, its subsidiaries and affiliates.
Non-Compete. (check one) ☐ - There shall be no Non-Compete established in this Agreement. ☐ - During the term of employment, the Employee understands that he or she will be subject to learning proprietary information, including trade secrets, which could be applied to competitors of the employer. Therefore, in order to protect the fiduciary interests of the Employer, the Employee agrees to: (check all that apply) ☐ - Withhold from working in the following industry(ies): ☐ - Withhold from working for the following employer(s): ☐ - Withhold from working in the same industry(ies) as the Employer in the following area(s): ☐ - Other: This Non-Compete shall be in effect for ☐ Months ☐ Years following the date of Employee’s termination. This Section shall be applied to the Employee engaging, directly or indirectly, any competitive industry. This includes, but is not limited to:
Non-Compete. Employee hereby agrees that for a period commencing on the date hereof and ending on the Termination Date, and thereafter, through the later of (a) the period ending on the first anniversary of the Termination Date or (b) the period ending at the conclusion of the Severance Period (collectively, the “Restrictive Period”), he shall not, directly or indirectly, as employee, agent, consultant, stockholder, director, co-partner or in any other individual or representative capacity, own, operate, manage, control, engage in, invest in or participate in any manner in, act as a consultant or advisor to, render services for (alone or in association with any person, firm, corporation or entity), or otherwise assist any person or entity (other than the Company) that engages in or owns, invests in, operates, manages or controls any venture or enterprise that directly or indirectly engages or proposes to engage in any element of the Business anywhere within a 100-mile radius of the Chicago metropolitan area or within a 100-mile radius of any area (or in the event such area is a major city, the metropolitan area relating to such city) in which the Company on the Termination Date engages in any element of the Business (the “Territory”); provided, however, that nothing contained herein shall be construed to prevent Employee from investing in the stock of any competing corporation listed on a national securities exchange or traded in the over-the-counter market, but only if Employee is not involved in the business of said corporation and if Employee and his associates (as such term is defined in Regulation 14(A) promulgated under the Securities Exchange Act of 1934, as in effect on the date hereof), collectively, do not own more than an aggregate of 3% of the stock of such corporation. With respect to the Territory, Employee specifically acknowledges that the Company intends to expand the Business into and throughout the United States.
See more samples of Non-Compete
Non-Compete: Everything you need to know
The non-compete agreement is used to avoid competition between two parties, typically an employee and an employer. The agreement puts a prohibition on the employee from working for or becoming a competitor for a certain period. The non-compete agreement also puts restrictions on the party (employee here) from working for a competitor in the same market or starting up another business in the same field.
The agreement, also known as a non-compete covenant, comes with a certain set of features. some key features of such an agreement are:
- Duration: The agreement has a finite time duration till which it remains active. The agreement, in most cases, is valid till the completion of the period of employment. The agreement is a part of the Contract Act that operates in our country.
- Legality: A non-compete agreement comes with statutory or legal backing. It is regulated by respective acts of each of the states in the US; for example, the Fla. Stat. § 542.335, Section 542.335(1)(b) provides for enforceability in Florida. The section also provides for the protection of the other party's (Employer) interests under the agreement.
- Leave Clause: The agreement also carries a leave clause, also known as the garden leaves clause. As per it, the employer is required to pay salaries to the employees during the period of the agreement. The clause allowing for the salaries post-termination of the contract is, however, something not seen in most of such agreements generally.
- Unilateral Obligation: The non-compete type of agreements come with a unilateral obligation. Such agreements are the ones where one party shares confidential information with the other. Thus, the obligation is on the other party to keep the promise. In this case, the obligation is on the employees to keep the agreement.
- The Clause of Exception: Non-compete agreement, like most legal agreements, carries an exception clause. This calls for the breach of agreement on the part of the employee in certain exceptional cases. In that case, the employee would not be charged guilty for breaking the agreement.
- Compensation Clause: The compensation clause comes into effect in case of willful default of the agreement by the 2nd party, that is, an employee. It calls the employee to reimburse the employer for the breach of contract causing the damage to the business of the employee.
Furthermore, the non-compete agreement can have additional clauses and features. However, the above-mentioned ones are the basic or core of the features that are common to all such agreements. The addition of features of more clauses and conditions is also based on the mutual understanding and agreement of the parties involved.
How It Works
Having understood the features of the non-compete agreement, it's important to know how it is put to work or what enforceability.
- The agreement has a specified date from which it comes into effect. That date is usually the date on which both parties sign the given agreement.
- The agreement also has a specific location that would be covered under its ambit. Say, for example, if the agreement is signed in Florida, then the obligations under the agreement may be applicable for that very region only. That is, the 2nd party or employee is free to compete in any other region.
- Jurisdiction is another important part of the enforceability of the agreement. That is, in case of the breach of the agreement, judicial authorities of which region would be reached first by the aggrieved party. Taking the example of New York again, we would say that the jurisdiction of such an agreement would be New York County Supreme Court and other lower judicial authorities in the state.
- The amount of compensation in case of breach of the contract to be provided by the 2nd party (Employee) is also a part of the working of the agreement. Further, it also provides for how compensation would be provided to the aggrieved party.
- In case the agreement is signed for an employing company that is a part of a group and employs, the employment agreement does not need to be applicable for all firms. That is, the agreement can apply to the firm employing the employee in actuality and providing for the salary. It would not be applicable for the other firms of the group generally. However, as a special clause or extension, this can be made possible. Provided if both parties agree.
Read more on the implementation of non-compete clauses in US labor markets here.
Benefits of Non-Compete Agreement
The non-compete agreement comes with its own sets of benefits for party 1, that is, the employee. As by now, we have seen that it prevents the business competition for the employers by its very nature it brings in other benefits too. somese benefits include:
- One major benefit of the agreement is that it safeguards the secrets of business to be utilized by the employer. That is, it prevents the exploitation of employers by safeguarding trade secrets.
- Another benefit of the agreement for the employer is that it incentivizes providing specialized training to the employer as the agreement comes with an obligation period which can sync with a minimum service period post-training for the employees.
- The agreement also prevents unfair competition, which ultimately has an effect on the consumers in the market.
Learn why companies use non-compete agreements in this article.
Drawbacks of Non-Compete Agreement
Along with its benefits (which are in favor of the employer as per the nature of the agreement), the non-compete agreement carries some drawbacks. These are mostly from the perspective of the employee. some drawbacks include:
- One major drawback is that the agreement reduces the bargaining capacity of the employee. Further, it reduces the scope of exploration of opportunities for them.
- The agreement kind of puts restrictions on the employee, which doesn't go well with them. An employee likes to work with free will without any restrictions. Making them sign an agreement as compulsion can be a turn-off for them. This can hinder performance as well.
- The agreement is costly to enforce. For a firm, it might be manageable to manage the legal expenses for enforcement. However, most of the time, an employee can't manage it. Thus, it is a burden from an employee's perspective.
- Geography, or what is called location for enforcement, is a limitation of the agreement that surely affects the employers. The agreement carries its enforceability and jurisdiction for a particular location. Thus, there is a threat to business even if the agreement's terms are not breached. This article details the enforceability of non-compete agreements in different US states.
A non-compete agreement carries its pros and cons. One set of features gives an edge to the employee while others tilt it in favor of the employer. However, the overall nature of the agreement keeps the employer's perspective in front.
More Samples of Non-Compete
Non-Compete. The Director agrees that during the Directorship Term and for a period of Three (3) years thereafter, he shall not in any manner, directly or indirectly, through any person, firm or corporation, alone or as a member of a partnership or as an officer, director, stockholder, investor or employee of or consultant to any other corporation or enterprise; engage in the business of developing, marketing, selling or supporting technology to or for businesses in which the Company engages in or in which the Company has an actual intention, as evidenced by the Company's written business plans, to engage in, within any geographic area in which the Company is then conducting such business. Nothing in this Section 6 shall prohibit the Director from being (i) a stockholder in a mutual fund or a diversified investment company or (ii) a passive owner of not more than three percent of the outstanding stock of any class of securities of a corporation, which are publicly traded, so long as the Director has no active participation in the business of such corporation.
Non-Compete. During the Restricted Period (as hereinafter defined), the Executive shall not in the United States of America, or in any foreign country, directly or indirectly, (i) engage in the Restricted Activity for the benefit of any person or entity other than the Company, Thomson and their affiliated companies; (ii) be an employee or consultant of, or provide services to, Factiva or Lexus/Nexis or any of their respective direct or indirect subsidiaries; (iii) have an interest in any person engaged in the Restricted Activity in any capacity, including, without limitation, as a partner, shareholder, officer, director, principal, agent, employee, trustee or consultant or any other relationship or capacity; provided, however, the Executive may own, directly or indirectly, solely as an investment, securities of any person which are publicly traded if the Executive (a) is not a controlling person of, or a member of a group which controls, such person, and (b) does not, directly or indirectly, own 1% or more of any class of securities of such person; or (iv) interfere with business relationships (whether formed heretofore or hereafter) between the Company or any of its affiliates and customers or suppliers of the Company or any of its affiliates. The term "Restricted Period" shall mean the period ending on the date that is (x) with respect to clause (ii) of this Section 5(A), eighteen (18) months following the end of the Executive's employment by the Company (or any affiliate of the Company) whether or not pursuant to this Agreement and (y) with respect to clauses (i), (iii) and (iv) of this Section 5(A), twelve (12) months following the end of the Executive's employment by the Company (or any affiliates of the Company) whether or not pursuant to this Agreement.
Non-Compete. During the period of Executive’s employment and for a period of one (1) year following termination of this Agreement and Executive’s employment for any reason (the “Restricted Period”), Executive will not directly or indirectly, on his behalf, or as a partner, officer, director, trustee, member, employee, or otherwise, within the United States or in any foreign market in which Executive was engaged in activities on behalf of the Company or any of its subsidiaries, own, engage in or participate in, in any way, any business that is similar to or competitive with any actual or planned business activity engaged in or planned by the Company or any of its subsidiaries at the time the employment under this Agreement was terminated. However, this Agreement shall not prohibit ownership by Executive of up to 2% of the shares of stock of any corporation the stock of which is listed on a national securities exchange or is traded in the over-the-counter market.
Non-Compete. Employee agrees that while this Agreement is in effect and for the longer of (i) the Pay-out Period, or (ii) a one-year period after any termination of this Agreement (the “Restricted Period”), Employee will not, directly or indirectly, alone or with others, individually or through or by a corporate or other business entity in which he may be interested as a partner, member, shareholder, joint venturer, officer, director, employee or otherwise, own, manage, control, participate in, lend his name to, or render services to or for any business within the United States of America or Canada which is competitive with that of the Company’s primary lines of business, provided, however, that the foregoing shall not be deemed to prevent the ownership by Employee of up to two percent (2%) of any class of securities of any corporation which is regularly traded on any national securities exchange. For the purpose of this Agreement, a business activity competitive with the primary lines of business of the Company shall include the design, manufacture, marketing, sale, distribution or servicing of any of the following: high-speed optical detectors, terahertz devices, optoelectronic components, optoelectronic subsystems and systems, III-V materials, or optoelectronic semiconductor epilayer designs or structures or any other product and product group hereafter in development, manufactured, marketed, sold, distributed or serviced by the Company after the date hereof, but in each case which is the same as or similar to or competes with, or has a usage allied to, a product being actively developed, marketed, sold or distributed by the Company at any time during Employee’s final twelve (12) months of employment by the Company.
Non-Compete. The Executive agrees not to directly or indirectly compete with the business of the Company and its successors and assigns during the Employment Period and for a period of one year following the Executive's termination of employment. The term "not compete" as used herein shall mean that the Executive shall not own, manage, operate, consult or be an employee in a business that has operations in the United States that are substantially similar to or competitive with the business activity of the Company or any of its Affiliates at the Executive Termination Date. Notwithstanding the foregoing the Executive may own up to 5% of any stock or security that is publicly traded on any national securities exchange or other market system.
Non-Compete. While employed by the Company and for a period of one (1) year thereafter (the “Non-Compete Period”), Executive shall not, without the prior written approval of the Company, become engaged or become interested, directly or indirectly, as a director, officer, employee or 5% or more stockholder or equity interest owner in, partner in, or consultant to, any business which is competitive with or similar to the business of the Company or any of its affiliates in any state in the United States (except in the states of North Dakota, South Dakota, Wyoming and Montana) where the Company or any of its affiliates conducts business. Notwithstanding the foregoing, Executive shall not be prohibited from employment or service with an entity that engages in a competing business if Executive provides evidence satisfactory to the Company, in its sole discretion, that Executive:
Non-Compete. The grantee agrees that during the term of grantee’s employment and for a period of two years thereafter (the “Coverage Period”) the grantee will not engage in, consult with, participate in, hold a position as shareholder, director, officer, consultant, employee, partner or investor, or otherwise assist any business entity (i) in any State of the United States of America or (ii) in any other country in which the Company has business activities, in either case, that is engaged in any activities which are competitive with the business of providing healthcare or other personnel on a temporary basis to hospitals, healthcare facilities or other entities and any and all business activities reasonably related thereto in which the Company or any of its divisions, affiliates or subsidiaries are then engaged.