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If you're struggling to get your head around what a non-compete agreement is, then you're not alone.
We want to make things clearer for everyone. So, in this guide, we've compiled a list of some must-knows before you start writing your non-compete agreement. That way you can put your agreement together with confidence.
What is a non-compete agreement?
A non-compete agreement is commonly used in competitive industries, where trade secrets and intellectual property can give one company the edge over another. The agreement acts as a contract between two parties, usually at the beginning of a working relationship, i.e. when a business hires a new employee or contractor.
The agreement states that the hired individual will not use any information gained during the partnership to start, buy or work for a competing business once they have left the company. The main reason for the agreement is that it helps to prevent new competitors emerging in the market.
Download this template at Lawpath
When should I use a non-compete agreement?
A non-compete agreement comes in useful if you're worried about people using your intellectual property for their personal gain. A few common situations when you might want to use a non-compete agreement include:
- When you are hiring a new member of staff and want to make sure that when they leave, they will not use any industry secrets to start or work for a competing company.
- If you enter into a new contract with a partner and want to ensure that they don't use your confidential information in the future to help competitors gain an advantage or to set up their own competing business.
Non-compete agreement vs non-solicitation agreement
You can use both a non-compete agreement and a non-solicitation agreement as part of an employment contract. Choosing whether to include a non-compete agreement or a non-solicitation agreement in a contract depends on the nature of your business.
While a non-compete agreement prevents an employee working for a competitor, or opening a competing business whey they leave, a non-solicitation agreement aims to stop an employee encouraging customers or colleagues to stop working with your business, and work with them instead.
What does a non-compete agreement include?
There are certain clauses a non-compete agreement should include to make sure it is effective:
- Names of the two parties involved
- Start date of the agreement
- Duration of the agreement
- Actions that are prohibited when the agreement comes into effect
- Reasons why the actions are prohibited
- The geographic area in which the actions are prohibited
- What happens if someone breaches the non-compete agreement
How effective is a non-compete agreement?
It's worth bearing in mind that a non-compete agreement is only enforceable in Australia if the court considers the clauses reasonable. This is to protect a business from restricting an employee or contractor unnecessarily. If you're worried about the legitimacy of your agreement, ask a legal professional to look over or even draft up your document for you.
Do I need a lawyer for a non-compete agreement?
With a document as important as a non-compete agreement, it's always a good idea to seek legal help in some capacity. Whether you hire a lawyer to draft up your non-compete agreement, seek legal advice on your final draft of the document or simply use a non-compete agreement template, it is up to you.
Get access to customisable non-compete agreement templates online
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How do I write a non-compete agreement?
A well-written non-compete agreement can be the difference in your company losing it's competitive advantage or keeping it. That's why it's important to take time drafting your document and investing in the help of a legal professional to look over it.
Here are a few tips to consider when it comes to putting together a non-compete agreement:
- Research your competition. What is it that sets you apart from other competitors in the market? Identify the intellectual property and confidential information that you don't want others to use.
- Write up a draft. It may take a few attempts to get your non-compete agreement tailored exactly to the needs of your business. You can use a non-compete agreement template to help.
- Hire a lawyer to review your agreement. A lawyer will make sure that your agreement has no loopholes in it and covers all bases.
Where to get free legal documents and templates like a non-compete agreement
The effectiveness of a non-compete agreement should not be underestimated. It is an integral tool for businesses operating in competitive industries. Using a non-compete agreement template will make sure you're along the right lines from the beginning.
- Legal Vision. Legal Vision offers unlimited access to legal documents when you sign up to its monthly subscription service.
- Lawpath. When you sign up to Lawpath, you can customise and download your first document for free. After that, you'll need to pay a one-time fee for each template you use.
- LawDepot. Home to numerous free legal document templates including a non-compete agreement.
- Legal Zebra. An online legal resource, home to hundreds of legal templates. You can fill a template in online with your details before downloading it to use.
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