A Noncompete Agreement is a legal contract designed to safeguard a business from competition. Its primary purpose is to protect a company by limiting an employee, contractor, or business partner from disclosing proprietary information or working for a competing business, either by starting their own or joining an existing one. These agreements are also used to protect proprietary information, such as processes, client lists, and marketing strategies.
Noncompetes can either be a standalone legal document or included in another agreement as a "Noncompete Clause."
If you are looking to protect your company's proprietary information while also limiting potential direct competition, a Noncompete Agreement can help you.
A new regulation passed by the FTC on April 23, 2024 effectively bans the use of Noncompete Agreements nationwide in the employment context. This new regulation, however, does not take effect until September 4, 2024. The new regulation is also currently facing several legal challenges in federal court.
While some states already ban or restrict the use of Noncompetes for employees, small businesses in states where noncompetes are legal or limited may want to continue using them until September 4, 2024, or a federal court rules otherwise. Due to the risk that Noncompetes may soon be unenforceable, however, business owners may want to talk to a lawyer or consider other types of agreements that serve to similarly protect a business’ interests. These include:
