Non Compete Agreement PA PDF Template

[toc] Non compete agreements are designed to protect a company’s trade secrets from employees, contractors, partners, or anyone who has access to business secrets. Although an employer will often ask an employee to sign a non-competition agreement prior to starting work, the agreement won’t take effect until the employer-employee relationship ends.

While there are various circumstances in which companies will use non compete agreements, the goal is always the same. The protection of a company’s business and trade secrets. Whenever there is a business relationship that puts company secrets at risk, the company is likely to ask for a non compete agreement. Many U.S. companies require their employers to sign non-compete agreements as a condition of continued or new employment. Recent statistics indicate that nearly 20 percent of workers, or almost 30 million people in the U.S. are subject to these agreements The most common situations in which a company will use a non compete agreement are as follows:

Business partners who are at the end of a business relationship.

The conclusion of a business relationship between a company and a contractor.

The transfer of a business from one owner to another.

The beginning of a relationship between an employer and employee.

In all the situations described above, a company has or will reveal business practices and trade secrets to an employee, contractor, or business partner. When any of these business relationships end, the company could risk losing those secrets to a competitor. A non compete agreement offers some legal protection against this kind of loss.

Non compete agreements are used by businesses to protect their practices and secrets from competitors. Company owners will use these agreements when they hire new employees or contractors, or when ownership of the business changes hands. Individuals who might be asked to sign a non-compete agreement include:

Contractors.

Former owners or partners.

Employees.

Any individual with direct knowledge of business practices or secrets.

Non compete agreements are most commonly used at the beginning or end of business relationships. For example, an employer may ask a new employee or contractor to sign a non compete agreement prior to beginning employment. It is worth noting that the non compete agreement would not take effect until the employee or contractor’s relationship with the company ends.

Businesses who do not use non compete agreements might lose significant business to a competitor if an employee, former partner, or contractor either sells or gives away trade secrets. Another possible consequence is a former partner or employee opens a business in direct competition with a company.

Here is an example. A man opens a garage and taxi service in a small town. He hires a friend to work with him as a mechanic and taxi driver. All goes well for several years, but then the business owner and his employee have a dispute.

The employee quits his job in anger and decides to open his own garage and taxi service. Over the next year, the former employee succeeds in taking all of the taxi and repair business away from his former boss and puts him out of business. If the original business owner had asked his employee to sign a non compete agreement, he might not have lost his small business.

When you enter into a non-compete agreement with a business partner, contractor, or employee, you want to ensure that it will be enforceable in court. If you follow the steps outlined below, your agreement will stand the best possible chance to be upheld in court.

Make sure to include the names and addresses for all parties, including the protected party and the non-competing party.

Set a reasonable time limit during which the non-competing party will agree not to compete with the protected party. Note: The more reasonable the time limit, the more likely the agreement can be upheld in court.

Set a geographical range for the agreement. To ensure the agreement is enforceable, the geographic area should be limited to the market area in which the protected party operates.

List the activities and industries that the non-competing party cannot engage in under the agreement.

Document the form and amount of compensation offered to the non-competing party in exchange for entering into the agreement. Compensation can take the form of a job offer, stock options, or financial compensation.

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