How does a non-compete agreement work?

A non-compete agreement is an agreement between two parties whereby one party agrees not to compete with the other for a defined period in a defined area. Although many employment contracts include non-compete provisions, a separate document may be presented by, for example, an employer to an employee.

A non-compete agreement should be provided to a prospective employee before they commence employment with an employer. If it is provided after an employee’s employment has commenced then it may not be upheld. A non-compete agreement does not necessarily have to be between an employer and an employee, a company and a contractor may, for instance, decide to enter into one.

The purpose of a non-compete agreement is to ensure that when a party ceases engagement or employment, then the former contractor or employee will not engage in any activities that are in competition to the other party’s business.

It is important that the protections afforded to a party’s business by a non-compete agreement are reasonable, otherwise the agreement may be unenforceable.

The LegalVision network of lawyers can help advise you if you’re looking to enter into a non-compete agreement. It’s important that you seek legal advice should be sought to determine whether the terms of a non-compete agreement are reasonable.