Skip to content
Clausery

Confidentiality and restrictions

Non-compete clause: meaning and sample wording

A non-compete clause prevents a person or business from working for, or running, a competing business for a period and within an area after a relationship ends.

When to use it

Mostly used in senior employment contracts and in the sale of a business, where the buyer pays for goodwill that the seller could otherwise take straight back.

Sample non-compete clause

For six (6) months after the Termination Date, the Employee shall not, within [the geographic area], be employed by, engaged by or provide services to any business that competes with the business of the Company in which the Employee was materially involved during the twelve (12) months before the Termination Date.

This restriction applies only to the extent reasonably necessary to protect the Company's confidential information, customer connections and goodwill.

What to check

  • Check whether it is allowed at allCalifornia, Minnesota, North Dakota and Oklahoma void most employee non-competes, and many other US states limit them by salary, notice or duration. Outside the US, courts usually require a legitimate interest and a restriction no wider than necessary, and some countries require the employer to pay during the restricted period.
  • Keep it narrowTie the restriction to the business the person actually worked in, a realistic area and a short period. Wide clauses are the ones courts strike down.
  • Consider something less drasticA non-solicitation clause, strong confidentiality terms or garden leave often protect the same interests with less risk.
  • Business sales are differentCourts are far more willing to enforce a seller's non-compete in the sale of a business, because the buyer paid for the goodwill.

Make the variable parts fill themselves in

In a Word template, replace the details that change with {tags} and wrap optional wording in a section. Clausery turns them into questions, so each document only includes the parts that apply:

{#include_non_compete}
For {non_compete_months} months after the Termination Date, the Employee shall not, within {restricted_area}, provide services to any business that competes with the Company.
{/include_non_compete}

Paste this into your own template, then check it with the free template tag checker or read the template syntax.

Questions

Are non-compete clauses legal?

It depends heavily on where you are. They are generally unenforceable against employees in California, Minnesota, North Dakota and Oklahoma, restricted in many other US states, and enforceable elsewhere only when reasonable. Take local advice before relying on one.

How long can a non-compete last?

Six to twelve months is the range most often upheld for employees. Longer periods are usually only accepted in the sale of a business.

Can I use this sample wording as it is?

It is a general starting point. Contract law differs between countries and states, and the right wording depends on the deal, so have it reviewed before you rely on it.

Free templates that use it

Related clauses

Stop editing contracts by hand

Clausery turns your Word templates into short questionnaires and builds the finished document in your browser. Nothing is uploaded, and every library template is free.

Open Clausery Free templates

This page is general information, not legal advice. Laws differ between countries and states; have wording reviewed for your situation before you rely on it.