Last Updated on December 9, 2022 by Anda Malescu
In this article we seek to provide you with a comprehensive non-compete agreement definition as the concept is used in the United States. A non-compete agreement is a contract between two parties, usually two individuals, one company and one individual or two companies, in which one of the parties promises not to compete with the other party once their contractual relationship ended. That is, the party being restricted will not start, join, or buy a business that is similar to, and in competition with the other party to the non-compete agreement.
The agreement is typically signed at the start of a new business or employment relationship, such as between a company and a new employee, an independent contractor, a consultant hired to address a particular internal issue, or a vendor that will be privy to confidential information. Moreover, it can also be signed towards the end of the relationship as well, when a key employee is being let go or chooses to leave, or when a partner decides to exit the business or is forced to exit by the other business partners.
The purpose of the non-compete agreement is to protect the experience, know-how and information that companies struggle to acquire over the time. The goal of this agreement is to make it impossible for employees that leave a company or for external consultant that finish his or her job to be able to create a new business to compete with the company that has just paid them for their services.
While the objective of a non-compete agreement is to discourage or prevent a new competitor from forming, a non-compete agreement also provides few specific details including without limitation who is agreeing not to compete, who is preventing the competition from occurring, when is the agreement effective, the duration of the agreement, when is the agreement enforceable, what type of activity or business is prohibited, the geographic area in which competition is prohibited and the consideration for this type of agreement. Aside from these clauses, one can also insert non-solicitation or non-recruitment provisions. This means that the former employee or contractor is not allowed to persuade the clients of the company to leave, and they cannot approach the employees of the company to work for the new company.
There has been a serious controversial debate in the United States as to the enforceability and legality of non-compete agreements. In some states, such as California, non-compete agreements are unenforceable against employees. In fact, California does not recognize non-compete agreements at all. In other states, non-compete agreements may be enforced on the basis of reasonableness – this is the case in Florida. Usually, non-compete agreements that are specific and provide for a time frame have a tendency to be enforced in comparison to broad agreements with global clauses and a long duration. It is advisable for anyone who seeks to draft or sign a non-compete agreement to seek legal advice from an experienced attorney.
Contact us, your international business attorney in Florida, to help you better understand non-compete agreements, how they work and whether or not they are enforceable under Florida law or schedule a consultation.
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