What should an employment contract include?

A comprehensive employment agreement should include: (1) job title and description of duties; (2) compensation details — base salary, bonus structure, equity grants, and payment schedule; (3) benefits — health insurance, retirement plans, vacation, and sick leave; (4) employment classification — full-time, part-time, exempt, or non-exempt; (5) term — at-will or fixed duration; (6) termination provisions — notice periods, cause definitions, and severance terms; (7) confidentiality and non-disclosure obligations; (8) intellectual property and invention assignment clauses; (9) any restrictive covenants — non-compete, non-solicitation; and (10) dispute resolution procedures.

What is at-will employment?

At-will employment means that either the employer or the employee can end the employment relationship at any time, for any reason (or no reason), without advance notice. This is the default rule in 49 states (Montana is the exception, requiring "good cause" after a probationary period). However, at-will employment has important exceptions: employers cannot terminate employees for discriminatory reasons (race, gender, religion, age, disability), in retaliation for protected activity (filing a workers' comp claim, whistleblowing), or in violation of public policy. A written employment agreement can also modify at-will status by requiring cause for termination or specifying a notice period.

When do I need a severance agreement?

A severance agreement is typically used when an employer terminates an employee (especially in layoffs or without cause) and wants to provide compensation in exchange for a release of legal claims. Severance is generally not required by law, but is offered to: reduce the risk of wrongful termination lawsuits; ensure the departing employee signs a non-disparagement and confidentiality agreement; enforce post-employment restrictions; and maintain goodwill. For employees over 40, the Older Workers Benefit Protection Act (OWBPA) requires specific language and a 21-day consideration period. Typical severance ranges from 1-4 weeks of pay per year of employment.

What is the difference between an employee and an independent contractor?

The distinction between an employee and an independent contractor has significant legal, tax, and benefits implications. Employees receive W-2 tax forms, have taxes withheld, are entitled to benefits and labor law protections, and work under the employer's direction and control. Independent contractors receive 1099 forms, pay their own taxes, are not entitled to benefits, and maintain control over how they perform their work. Misclassifying employees as contractors can result in significant penalties, back taxes, and liability for unpaid benefits. The IRS, DOL, and state agencies use multi-factor tests emphasizing behavioral control, financial control, and the nature of the relationship.

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Non-Compete Agreement Template — Free Download 2026

Q: Are non-compete agreements enforceable?

Non-compete enforceability varies dramatically by state. California, Oklahoma, North Dakota, and Minnesota effectively ban non-competes for employees. Many other states enforce them only if they are "reasonable" in scope — typically limiting duration to 1-2 years, geographic reach to areas where the company actually does business, and activity restrictions to actual competitive roles. The FTC proposed a nationwide ban on most non-competes in 2024, though its implementation remains in legal dispute. Even in states that enforce non-competes, courts often modify overly broad agreements rather than enforcing them as written. Legal Tank's templates are drafted to maximize enforceability in each state.

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When Do You Need a Non-Compete Agreement?

You are onboarding a new employee in a senior, sales, or technical role who will have access to trade secrets, proprietary customer lists, pricing strategies, or confidential business methods, and you need a legally enforceable restriction on post-employment competition.

A key employee or executive is resigning to join a competitor, and you need to review or enforce the non-compete they signed at hire to prevent the immediate transfer of your confidential strategies, client relationships, and institutional knowledge to a direct rival.

Your company is acquiring another business and wants the selling owners and key personnel to sign non-competes as part of the purchase agreement to protect the goodwill and customer base you are paying for — these sale-of-business non-competes receive broader judicial enforcement than employment non-competes.

You are hiring an independent contractor or consultant who will be exposed to highly sensitive proprietary information and want to include a reasonable non-competition provision in the engagement agreement or as a standalone document.

A departing employee has signed an employment agreement with non-compete provisions, but the terms need to be updated, narrowed, or extended as part of a promotion, role change, or severance negotiation to ensure continued enforceability under current state law.

What Should a Non-Compete Agreement Include?

Restricted Activities Definition

Precisely define what competitive activities the restricted party is prohibited from engaging in. Rather than a blanket prohibition on "any competitive business," specify the types of products, services, industries, or roles that are restricted. Courts are far more likely to enforce narrowly tailored activity restrictions that protect a legitimate business interest without preventing the individual from earning a living in their general field.

Geographic Scope

Specify the geographic area where the non-compete restriction applies. This may be defined by radius (e.g., 25 miles from the employer's offices), by specific cities, counties, or states, or by the territories or markets where the employer actively conducts business. An overly broad geographic restriction — such as "worldwide" for a local service company — is a common reason courts strike down or reform non-compete agreements.

Duration of the Restriction

State the time period during which the non-compete is in effect after the relationship ends. Most enforceable employment non-competes range from 6 months to 2 years, with 12 months being the most commonly upheld duration. Sale-of-business non-competes may extend to 3 to 5 years. The duration should be proportional to the sensitivity of the information the restricted party accessed and the time it would take for that information to become stale or for the employer to re-establish client relationships.

Consideration Clause

A non-compete must be supported by valid consideration — something of value given in exchange for the restriction. For new employees, the offer of employment itself is generally sufficient consideration. For existing employees, many states require new consideration beyond continued employment, such as a promotion, raise, bonus, stock options, access to new confidential information, or a severance payment. Without adequate consideration, the agreement may be unenforceable from the start.

Legitimate Business Interest Statement

Identify the specific business interests the non-compete is designed to protect. Courts require that a non-compete serve a legitimate purpose, such as protecting trade secrets, confidential customer information, specialized training investments, or business goodwill acquired through a sale. A non-compete that merely prevents ordinary competition without a protectable interest will not survive judicial scrutiny.

Non-Solicitation and Non-Recruitment Provisions

Many non-compete agreements include companion provisions that prohibit the restricted party from soliciting the employer's customers, clients, or accounts (non-solicitation) and from recruiting or hiring the employer's employees (non-recruitment). These provisions are often enforced even in jurisdictions that disfavor traditional non-competes, making them a critical backup protection.

Remedies and Injunctive Relief

Specify that a breach of the non-compete will cause irreparable harm not adequately compensable by money damages, entitling the employer to seek injunctive relief — a court order prohibiting the violation — in addition to monetary damages. Including a tolling provision that extends the restricted period by the length of any violation ensures the employer receives the full benefit of the bargain.

Severability and Judicial Modification

Include a clause allowing a court to modify (or "blue pencil") any provision found to be overbroad rather than invalidating the entire agreement. Many states permit judicial reformation of unreasonable non-competes, and a severability clause signals to the court that the parties intended for the agreement to be enforced to the maximum extent permitted by law.

Signature Requirements

E-Signature Valid

Non-compete agreements are valid with electronic signatures under ESIGN/UETA.

Related Employment Templates

A non-compete agreement is often used alongside other employment documents. Depending on your situation, you may also need:

Employment Agreement Template

Employment

Free Severance Agreement Form

Employment

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How to Fill Out a Non-Compete Agreement

Identify the Parties and the Relationship Context

Enter the full legal names of the employer (or company) and the employee or contractor subject to the restriction. Indicate the nature of the relationship — new hire, existing employee receiving new consideration, independent contractor, or seller of a business. The context matters because courts apply different enforceability standards depending on the relationship type.

Define the Restricted Activities with Precision

Describe the specific competitive activities that are prohibited. Instead of broad language like "any business that competes," use targeted descriptions such as "providing SaaS-based accounting software to mid-market companies" or "soliciting clients for residential real estate brokerage services." Reference the restricted party's specific role and the information they accessed to justify the scope.

Set the Geographic and Temporal Boundaries

Enter the geographic area (radius, states, territories, or client-based restriction) and the duration of the restriction. Research your state's enforcement standards before setting these parameters — a 1-year, 50-mile restriction is far more likely to be enforced than a 5-year, nationwide prohibition. If the restricted party works remotely or serves clients nationally, consider using a client-based restriction instead of a geographic one.

Specify the Consideration Being Provided

Document exactly what the restricted party is receiving in exchange for the non-compete. For new hires, state that employment and access to confidential information constitutes consideration. For existing employees, specify the additional consideration — a raise, bonus, equity grant, or new role. In sale-of-business transactions, the purchase price and any earnout provisions serve as consideration.

Include Non-Solicitation and Non-Recruitment Terms

Define which customers, clients, or accounts the restricted party cannot solicit — typically limited to those with whom they had material contact during a specified lookback period (12 to 24 months). Set the non-recruitment restriction to cover key employees or team members the departing individual managed or worked closely with.

Select Governing Law and Obtain Signatures

Choose the governing state law carefully, as non-compete enforceability varies dramatically between states. California, Minnesota, North Dakota, and Oklahoma largely prohibit non-competes, while states like Florida, Texas, and Georgia enforce them under specific statutory frameworks. Have both parties sign and date the agreement, with the restricted party acknowledging they received adequate consideration and had the opportunity to consult an attorney.

Non-Compete Agreement Requirements by State

Non-Compete Agreement laws and requirements differ across states. Key variations include specific language requirements, notarization mandates, witness requirements, filing deadlines, and enforceability standards. Our templates incorporate state-specific provisions when you select your jurisdiction.

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Free Template vs Custom Non-Compete Agreement

Feature	Free Template	Custom (AI or Attorney)
Basic non-compete with activity, geography, and duration
Non-solicitation and non-recruitment provisions
State-specific enforceability languageCritical — enforceability varies dramatically by state	-
Garden leave / paid restriction period clause	-
Judicial modification (blue pencil) provision	-
Tolling provision for breach periods	-
Carve-outs for specific clients or industries	-
Attorney-reviewed enforceability assessmentStrongly recommended before enforcement	-

Non-Compete Agreement Template FAQ

What is a non-compete agreement?

A non-compete agreement, also called a covenant not to compete or a restrictive covenant, is a contract in which one party — typically an employee, contractor, or business seller — agrees not to engage in competitive business activities against the other party for a specified period of time within a defined geographic area after the relationship ends. The purpose is to protect legitimate business interests such as trade secrets, confidential customer information, specialized training investments, and business goodwill. Non-competes are distinct from non-disclosure agreements, which only restrict the disclosure of confidential information, and non-solicitation agreements, which only prevent the solicitation of specific clients or employees. A well-drafted non-compete encompasses all three protections. The enforceability of these agreements is one of the most actively litigated areas of employment law, with courts in every state balancing the employer's right to protect its business against the individual's right to earn a livelihood in their chosen profession.

Are non-compete agreements enforceable?

Enforceability depends entirely on state law and the specific terms of the agreement. A majority of states enforce non-competes if they are supported by adequate consideration, protect a legitimate business interest, and are reasonable in scope, duration, and geographic reach. However, several states have enacted outright bans or severe limitations. California has the strongest prohibition — Business and Professions Code Section 16600 voids non-competes in virtually all employment contexts, with narrow exceptions for the sale of a business. Minnesota, North Dakota, and Oklahoma have similar prohibitions. Other states like Colorado, Illinois, Oregon, and Washington have enacted laws restricting non-competes based on the employee's income level, requiring advance notice, or mandating garden leave pay during the restricted period. Even in enforcement-friendly states, courts routinely strike down non-competes that are overbroad, lack consideration, or impose unreasonable hardship on the restricted party. The FTC proposed a federal ban on non-competes in 2024 but the rule was struck down by federal courts, leaving enforcement primarily a matter of state law.

How long can a non-compete last?

The permissible duration depends on the context and state law. For employment non-competes, most courts consider 6 months to 2 years to be a reasonable range, with 12 months being the most commonly enforced duration. Courts evaluate whether the duration is proportional to the protectable interest — a restriction on an executive with deep knowledge of a multi-year strategic plan may warrant 24 months, while a restriction on a mid-level sales representative might only support 6 to 12 months. For sale-of-business non-competes, courts allow longer durations — typically 3 to 5 years — because the buyer has paid valuable consideration for the goodwill and customer relationships being protected. Some states impose statutory maximums: Oregon limits non-competes to 12 months for employees, and Colorado limits them to the duration for which the employee received garden leave compensation. A duration that is enforceable in one state may be considered unreasonable in another, which is why the governing law selection in your agreement is so important.

Can I be forced to sign a non-compete?

No one can physically compel you to sign a non-compete, but refusing to sign may have consequences depending on the context. A prospective employer can condition a job offer on your willingness to sign a non-compete, meaning refusal would result in the offer being withdrawn. For existing employees, the situation is more nuanced — many states require the employer to provide additional consideration (such as a raise, bonus, or promotion) beyond merely continuing your employment, and some states require advance notice before presenting the non-compete. If your employer presents a non-compete as a condition of ongoing employment without additional consideration, the agreement may be unenforceable in states that require independent consideration. In any case, you have the right to negotiate the terms, request that the scope be narrowed, ask for garden leave compensation during the restricted period, or consult an attorney before signing. Understanding your state's specific requirements is essential before you agree to any restriction on your future career.

What happens if I violate a non-compete agreement?

If you violate an enforceable non-compete, the former employer can file a lawsuit seeking injunctive relief — a court order requiring you to immediately stop the competitive activity — and monetary damages for any harm caused by the violation. Many courts grant temporary restraining orders and preliminary injunctions within days of filing, which can force you to leave a new job or shut down a competing business while the case is litigated. If the non-compete includes a tolling provision, the restricted period is extended by the duration of the violation, meaning you do not benefit from running out the clock. Monetary damages may include the employer's lost profits, lost customers, and the cost of replacing you, and some agreements include attorneys' fee shifting provisions that make the violating party pay the employer's legal costs. Your new employer may also face liability for tortious interference with contract if they knew about the non-compete and hired you anyway. Before taking a position that might violate a non-compete, consult an employment attorney who can evaluate the agreement's enforceability under your state's specific standards.

What is the difference between a non-compete and a non-solicitation agreement?

A non-compete agreement broadly prohibits the restricted party from engaging in competitive business activities — working for a competitor, starting a competing business, or entering a competing industry — within defined geographic and temporal boundaries. A non-solicitation agreement is narrower: it only prohibits the restricted party from actively soliciting specific customers, clients, or employees of the former employer, without restricting the individual's ability to work for a competitor or in the same industry. For example, a sales representative with a non-solicitation agreement could join a competing firm but could not contact or pursue the specific clients they served at the former employer. Because non-solicitation agreements are less restrictive of the individual's right to work, courts enforce them more readily and in more jurisdictions than traditional non-competes. Many employers use both provisions together — the non-compete as the primary protection and the non-solicitation as a fallback in case the non-compete is deemed unenforceable. In states like California that prohibit non-competes, narrowly tailored non-solicitation provisions targeting specific trade-secret-derived customer relationships may still be enforceable under certain circumstances.

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Attorney-Verified Document: All Legal Tank templates are drafted and reviewed by licensed attorneys to ensure legal accuracy and compliance with current state and federal laws. While our templates meet professional legal standards, individual circumstances vary. We recommend consulting with a licensed attorney in your jurisdiction for complex or high-stakes legal matters. Legal Tank is not a law firm and use of our platform does not create an attorney-client relationship.

Reviewed by licensed attorneys · Editorial policy · Last updated March 2026

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