Non- Competing Employment Contracts

Non-Competing Employment Agreements: A simple guide for employees and employers.

Introduction

A non-competing agreement sets post-employment, employment and work restrictions on an employee. Non-competing agreements are aimed at safeguarding the employer’s trade and financial interests, including intellectual property rights, and trade secrets. These agreements also restrict former employees from springboarding i.e. setting up the same business, wit in the same geographical area and pouching the clients and existing employees of the former employer.

What is on this page?

  • What is a non-compete Agreement
  • The benefit to the Employer
  • Limitations
  • Limitations other than non-compete clauses

What is a non-compete Agreement?

It is an agreement between an employer and an employee that imposes post-employment restrictions on the employee.  Employers can agree on a separate non-competing contract with the employee or insert non-competing section and clauses in the Employment contract. The clause imposes post-employment restrictions on former employees from working for competitors or defined groups of competitors for a specified period of time. It covers things such as:

  • Trade connection
  • Trade secret and confidential information
  • Stability of the workforce

The benefit to the Employer

The benefit to the employer is by providing them with:

  • Greater assurance that the company’s intellectual property (IP),
  • Confidential resources,
  • Proprietary information will not be made available to or used by a competitor

Limitation

The non-competing agreement could not be used in the following:

  • Low-wage workers.
  • The clause is valid for 5 years or less for the sale of a business; or
  • 2 years for employment contracts limitation.

Limitation other than non-compete clauses

There are other methods to restrict a formal employee other than having a non-compete clause; such as:

  • Legal agreements not to solicit clients
  • Confidentiality agreement
  • Inevitable disclosure doctrine: arises after an employee who is not bound by a non-compete agreement joins a competitor. The former employer may assert that there is an implied non-compete because the former employee will unavoidably disclose sensitive information.

Disclaimer

While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legalally does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.