Create a Non-Compete Agreement in Minutes

A non-compete agreement — also called a covenant not to compete — is a contract in which one party agrees not to engage in competing activities for a defined period, within a defined area, after a relationship ends.

Businesses use a non-compete agreement to protect legitimate interests such as trade secrets, confidential methods, customer relationships, and the goodwill they have built. The covenant balances those interests against a person’s right to earn a living, which is why a well-drafted non-compete agreement is carefully limited rather than open-ended. A restriction that is no broader than necessary is far more likely to hold up than a sweeping one.

Three terms define the reach of any non-compete agreement: the restricted activities (which kinds of work or competing products are off-limits), the geographic scope (the area where the restriction applies), and the duration (how long it lasts after the relationship ends).

A non-compete agreement also needs consideration — something of value given in exchange for the promise, such as a job offer, a raise, severance, equity, or the purchase price in a sale. Without adequate consideration and reasonable limits, a non-compete may be hard to enforce, and a court may decline to uphold it.

An employee non-compete is signed at hiring or as part of a promotion or severance, and is generally read narrowly because employees have less bargaining power.

A contractor non-compete should be drawn even more tightly, limited to the specific field and clients involved. A sale-of-business non-compete is typically given the widest latitude because the buyer is paying for the seller’s goodwill, and courts more readily uphold a longer term and larger area in that context where the price reflects the covenant.

Reasonableness is the heart of a non-compete agreement. A restriction is more likely to hold up when its activities, geography, and duration are no broader than necessary to protect a genuine business interest such as trade secrets or customer goodwill.

Overbroad covenants — restricting an entire industry nationwide for many years — risk being struck down or narrowed by a court. Including a severability and reformation clause lets the rest of the agreement survive even if one part is found too broad, so a single defect does not void the whole non-compete.

Most employee and contractor non-competes run from six months to two years, while sale-of-business covenants often extend to five years or more because of the goodwill being purchased.

The right duration depends on how quickly your competitive information goes stale. A non-compete agreement that lasts only as long as the protected information stays valuable is far more defensible than one that lingers indefinitely after it has lost its edge.

Enforceability of a non-compete agreement varies significantly by jurisdiction. Some US states limit or restrict non-competes — for example, California generally does not enforce employee non-competes, and several other states cap them by wage thresholds or industry.

This generator produces a strong, reasonable starting point based on common drafting practice, but it is informational only and is not legal advice. For an enforceable agreement in your location, have a qualified attorney review your non-compete before anyone signs it.