Non-Compete Clause (NCC)

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A Non-Compete Clause (NCC) is a contractual clause centered on non-compete provisions (which focus on restricting a contract party from entering into [[____]] in competition against [[____]].

  • Context:
    • It can (often) be subject to legal scrutiny to ensure that they are fair and reasonable in scope, duration, and geographic area.
    • It can be enforced through legal action if breached, potentially leading to damages or injunctions against the party violating the clause.
    • It can be found in: Employment Agreements, Non-Compete Agreements, ...
    • It can (typically) contain Non-Complete Clause Provisions, such as:
      • Duration Provision (with labels DURATION_OF_RESTRICTION, POST-TERMINATION, TOLLING, which specifies the length of time the non-compete agreement remains in effect after the termination of the employee's tenure, ensuring the temporary nature of the restriction, such as:
        • The restrictions set forth in this Non-Compete Agreement shall commence on the date of termination of the Employee's employment with the Company for any reason and shall continue for a period of [Duration] thereafter.(DURATION_OF_RESTRICTION, POST-TERMINATION)1 In the event of a breach of this Non-Compete Agreement by the Employee, the [Duration] shall be extended by the length of time during which the Employee is in breach.(TOLLING)2
      • Scope of Activities Provision (with labels PROHIBITED_ACTIVITIES, COMPETITOR_DEFINITION, BUSINESS_DEFINITION), which delineates the specific types of work or business activities that are prohibited, clearly defining what constitutes competitive behavior, such as:
        • During the Non-Compete Period, the Employee shall not, directly or indirectly, engage in, be employed by, provide services to, or own any interest in any business that competes with the Business of the Company,(PROHIBITED_ACTIVITIES)1 which is defined as [Business Definition].(BUSINESS_DEFINITION)2 A "Competing Business" is defined as any person, firm, corporation, or other entity that engages in any business or activity that is substantially similar to or competitive with the Business of the Company.(COMPETITOR_DEFINITION)3
      • Geographic Limitation Provision (with labels GEOGRAPHIC_SCOPE, LOCATION_OF_BUSINESS, LOCATION_OF_CUSTOMERS), which sets forth the geographic areas where the restrictions apply, balancing protection of the company's interests with the individual's right to work elsewhere, such as:
        • The geographic scope of this Non-Compete Agreement shall extend to [Geographic Scope],(GEOGRAPHIC_SCOPE)1 which the parties acknowledge and agree is a reasonable and necessary geographic area to protect the legitimate business interests of the Company,(REASONABLENESS_ACKNOWLEDGMENT)2 given the nature of the Business and the locations in which the Company conducts its operations and solicits or serves customers.(LOCATION_OF_BUSINESS, LOCATION_OF_CUSTOMERS)3
      • Enforceability Consideration Provision (with labels REASONABLENESS_OF_RESTRICTIONS, BLUE_PENCIL, SEVERABILITY), which includes terms that make the clause reasonable and enforceable under the law, often requiring that restrictions be limited in scope, duration, and geographic area, such as:
        • The parties agree that the restrictions contained in this Non-Compete Agreement are reasonable and necessary to protect the legitimate business interests of the Company, and do not impose a greater restraint than is necessary to protect such interests.(REASONABLENESS_OF_RESTRICTIONS)1 If any provision of this Non-Compete Agreement is found by a court of competent jurisdiction to be invalid or unenforceable, such provision shall be reformed by the court to the minimum extent necessary to make it valid and enforceable, or if such reformation is not possible, such provision shall be severed from this Non-Compete Agreement, and the remaining provisions shall remain in full force and effect.(BLUE_PENCIL, SEVERABILITY)2
      • Breach and Remedies Provision (with labels INJUNCTIVE_RELIEF, MONETARY_DAMAGES, ATTORNEYS_FEES), which outlines the consequences and legal remedies available in case of a breach of the non-compete agreement, including potential injunctive relief, monetary damages, and recovery of attorneys' fees, such as:
        • The Employee acknowledges that a breach of this Non-Compete Agreement may result in irreparable harm to the Company for which monetary damages would be inadequate.(IRREPARABLE_HARM)1 Accordingly, in addition to any other remedies available at law or in equity, the Company shall be entitled to seek injunctive relief to prevent or restrain any such breach, without the need to post a bond.(INJUNCTIVE_RELIEF)2 The Employee shall be liable for all monetary damages incurred by the Company as a result of any breach of this Non-Compete Agreement, including but not limited to lost profits and reasonable attorneys' fees.(MONETARY_DAMAGES, ATTORNEYS_FEES)3
    • ...
  • Example(s):
    • as found in a Employment Contract, to prevent employees from joining competitors or starting competing businesses immediately after their employment ends (to protect proprietary information or trade secrets), such as:
      • "Employee acknowledges that during the term of employment and for a period of twelve (12) months immediately following the termination of employment, for any reason, Employee shall not directly or indirectly engage in any business activity, or be employed by any business, in direct competition with the Company’s business operations, products, or services within any geographic area where the Company operates."
    • as found in a Business Sale Agreement, where the seller agrees not to start a new, competing business within a certain time frame and geographic area after the sale, such as:
      • "Seller hereby agrees that, for a period of three (3) years following the closing date of this sale, Seller will not engage in, or own any interest in, any business that competes with the sold business, within a radius of one hundred (100) miles from the location of the sold business."
    • as found in a Service Agreement or Consulting Contracts, where service providers are restricted from offering their services to direct competitors of the client during and after the termination of the agreement, such as:
      • "Consultant agrees that during the term of this agreement and for a period of one (1) year thereafter, Consultant will not provide consulting or other services to any business that competes directly with Client’s primary business operations, as defined in this agreement."
    • as found in a Partnership Agreement or an Exit Agreement, to prevent partners from leaving the partnership and immediately competing against the partnership, such as:
      • "Upon termination of the partnership for any reason, the departing partner agrees not to engage in or become associated with a competing business within a fifty (50) mile radius of the partnership’s primary place of business for a period of two (2) years."
    • as found in a Franchise Agreement to restrict franchisees from opening a similar business outside the franchise network within a certain period and geographic location, such as:
      • "Franchisee agrees that during the term of the franchise agreement and for a period of two (2) years following its termination or expiration, franchisee shall not directly or indirectly, within a one hundred (100) mile radius of the franchised territory, engage in a business similar to the franchised business."
    • as found in a Business Sale Agreement preventing the seller from starting a similar business (e.g., for three years), such as:
      • "The Seller agrees not to directly or indirectly engage in, or have any ownership interest in, any business that is similar to the business being sold under this agreement, within any area where the Company conducts business, for a period of three (3) years following the effective date of the sale."
    • ...
  • Counter-Example(s):
  • See: Employment Law, Contract Law, Trade Secret, Intellectual Property Right, Apprenticeship, Trade Secret.

References

2024

  • https://www.lawinsider.com/clause/non-competition-clause
    • NON-COMPETITION CLAUSE. The parties agree that during the term of employment and for a period of up to 12 months after the expiry of the agreed notice period (such 12-month period referred to as the "Restricted Period"), the Executive shall not be entitled to be employed by, directly or indirectly offer services to, start up, lead, be a board member in, have an ownership interest in, participate in or otherwise in any way engage in any business that directly or indirectly competes with the Company or the Group (the "Non-Competition Clause"). In case of summary dismissal, the Restricted Period commences on the date of the summary dismissal. The Company may at the request of the Executive, or at any other time, decide if and to what extent the Non-Competition Clause shall be invoked. The procedure in connection with such a decision shall comply with the mandatory provisions of Chapter 14 A in the WEA including the Company's obligation to provide the Executive with a written statement in this regards. If the Restricted Period is invoked for a shorter period of time, the Compensation to the Executive (see below) is reduced correspondingly. Should the Employer decide not to invoke the Non-Competition Clause, the Executive will not be entitled to such Compensation. If the Non-Competition Clause is invoked, the Executive shall receive compensation during the Restrictive Period equivalent to 100% of the Executive's annual remuneration up to 8 G ("G" means the Basic Amount in the National Insurance Scheme), and then, if applicable, 70% of the annual remuneration exceeding 8G ("Compensation"). The term "remuneration" is to be understood in line with Chapter 14 A in the WEA. The total amount of Compensation will not exceed 12 G. The Compensation is based on the Executive's remuneration the last 12 months preceding the time of the notice and is paid monthly on the Company's payroll date. The Compensation is not included in the basis for holiday pay or pension, and the Executive is not entitled to any bonus or other supplementary benefits from the Company during the period for payment of the Compensation. The Employer will carry out tax deduction and any other mandatory deductions in accordance with applicable law. The Compensation is paid monthly on the Company's payroll date. Deductions shall be made in the Compensation for any income or other remuneration (or similar) that the Executive receives from the Company or accrues from others in the Restricted Period limited to 50% of the Compensa...
    • NON-COMPETITION CLAUSE. The employer shall not be allowed to impose any restrictions on journalists as regards their performing their profession of journalist after the end of the employment.
    • NON-COMPETITION CLAUSE. No work may be carried out in the interests of a competing institution.
    • NON-COMPETITION CLAUSE. In addition to his obligations as an executive and whether or not he remains an executive of the Company, the Executive agrees that during the period commencing with the Effective Date and ending upon the second anniversary of the termination date of his Employment following termination of his Employment under any of Section 8(b), (c), (e) or (f), he will not, without the prior written consent of the Company, engage, directly or indirectly, in any business that sells any industrial valves or performs any industrial-valve services in competition with the Company or any subsidiary of the Company in any area within any "Territory" surrounding any service facility of the Company or any subsidiary of the Company (determined as of that termination date). For purposes of this Section 11, the "Territory" surrounding any service facility will be: (i) the city, town or village in which that service facility is located; (ii) the county or parish in which that service facility is located; (iii) the counties or parishes contiguous to the county or parish in which that service facility is located; (iv) the area located within 50 miles of that service facility; (v) the area located within 100 miles of that service area; and (vi) the area in which that service facility regularly provides services at the locations of its customers.
    • NON-COMPETITION CLAUSE. In addition to his obligations as an ---------------------- executive and whether or not he remains an executive of the Company, the Executive agrees that during the period commencing with the Commencement Date and ending upon termination of employment with the Company, however caused, he will not, without the prior written consent of the Company, engage, directly or indirectly, in any business that competes with the Company for customers of the Company. In the event of a breach by the Executive of this Section 3.1, in addition to other remedies provided by applicable law, the Company will be entitled to issuance of a temporary restraining order or preliminary injunction enforcing its rights under this Section 3.1.
    • NON-COMPETITION CLAUSE. 1. Direct (non-competition) clauses designed to prevent or hinder a temporary worker from entering the service of a hirer are prohibited and therefore void
    • NON-COMPETITION CLAUSE. If Employee voluntarily terminates his or her employment with the Company or if the Employee's employment is terminated for Cause or Performance Related Reasons, he or she will not, for a period of twelve (12) months thereafter, seek or obtain employment with a firm which directly competes with the Company's business activities as conducted in the Territory on the date on which Employee terminates nor will he solicit any of the Company's employees to leave and seek employment with another firm. It is stipulated that both the twelve (12) month term of this provision and the scope of territory are reasonable, but a court of competent jurisdiction may alter the same to the appropriate standard of reasonableness.

2024

  • https://www.lawinsider.com/clause/non-compete
    • Non-Compete. During the term of this Agreement and for a period of twelve (12) months following the Director’s removal or resignation from the Board of Directors of the Company or any of its subsidiaries or affiliates (the “Restricted Period”), the Director shall not, directly or indirectly, (i) in any manner whatsoever engage in any capacity with any business competitive with the Company’s current lines of business or any business then engaged in by the Company, any of its subsidiaries or any of its affiliates (the “Company’s Business”) for the Director’s own benefit or for the benefit of any person or entity other than the Company or any subsidiary or affiliate; or (ii) have any interest as owner, sole proprietor, stockholder, partner, lender, director, officer, manager, employee, consultant, agent or otherwise in any business competitive with the Company’s Business; provided, however, that the Director may hold, directly or indirectly, solely as an investment, not more than one percent (1%) of the outstanding securities of any person or entity which is listed on any national securities exchange or regularly traded in the over-the-counter market notwithstanding the fact that such person or entity is engaged in a business competitive with the Company’s Business. In addition, during the Restricted Period, the Director shall not develop any property for use in the Company’s Business on behalf of any person or entity other than the Company, its subsidiaries and affiliates. Sample 1Sample 2Sample 3 See All (89)
    • Non-Compete. Employee acknowledges and recognizes the highly competitive ----------- nature of the Company's business and that Employee's duties hereunder justify restricting Employee's further employment following any termination of employment. The Employee agrees that so long as the Employee is employed by the Company, and (i) for a period of [two] years following the termination of this Agreement, Employee, except when acting at the request of the Company on behalf of or for the benefit of the Company, will not induce customers, agents or other sources of distribution of the Company's business under contract or doing business with the Company to terminate, reduce, alter or divert business with or from the Company, and (ii) for a period of one year following the termination of this Agreement, Employee shall not, directly or indirectly, either as a principal, agent, employee, employer, consultant, partner, member or manager of a limited liability company, shareholder of a company that does not have securities registered under the Securities Exchange Act of 1934, as amended (the "1934 Act"), or shareholder in excess of one percent of a company that has securities registered under the 1934 Act, corporate officer or director, or in any other individual or representative capacity, engage or otherwise participate in any manner or fashion in any business that is in competition in any manner whatsoever with the business activities of the Company, in or about any market in which the Company has, or has publicly announced a plan for doing business. Employee further covenants and agrees that the restrictive covenant set forth in this paragraph is reasonable as to duration, terms and geographical area and that the same protects the legitimate interests of the Company, imposes no undue hardship on Employee, and is not injurious to the public. The covenant set forth under (ii) above shall not apply if Employee's employment is terminated within twelve months of a Change in Control as defined in of this Agreement. Ownership by Employee, for investment purposes only, of less than one percent of any class of securities of a corporation if said securities are listed on a national securities exchange or registered under the 1934 Act shall not constitute a breach of the covenant set forth under (ii) above. It is the desire and intent of the Parties that the provisions of this paragraph be enforced to the fullest extent permissible under the laws and public policies applied in each jurisd... Sample 1Sample 2Sample 3 See All (76)
    • Non-Compete. The Executive acknowledges that he/she has gained or will gain extensive and valuable experience and knowledge in the business conducted by the Company and has had or will have extensive contacts with the customers, suppliers, investors, and/or consultants of the Company. The Executive recognizes that it is critical to the ongoing success of the Company that it preserve its goodwill and protect its proprietary rights and its other important business interests. Accordingly, the Executive agrees that he/she will not, while employed by the Company during the Term hereof and for a period of one year thereafter (or, in the event of the Company's termination of the Executive without cause or if the Executive's employment is terminated by him/her for Good Reason (as defined herein) or by the Company within six months before or within twenty-four (24) months after a Change of Control (as defined herein), for such longer period during which the Executive is receiving compensation pursuant to the provisions of Section 8 hereof), directly or indirectly, engage in (whether as an officer, employee, consultant, director, proprietor, agent, partner or otherwise) or have an ownership interest in, or participate in the financing, operation, management or control of, any person, firm, corporation or business engaged in competition with the Company, any of its affiliates, its parent or subsidiaries in the business of manufacture or sale of printed circuit boards, backpanels, backplanes and/or box build assembly products, or in the development of technology for such businesses; provided, however, that these restrictions shall only apply to the Executive's activities post-termination of employment with persons, firms, corporations or businesses with annual gross revenues in a competing business, as defined herein, (in the aggregate with its affiliated entities) in excess of one hundred million United States dollars. It is agreed that ownership of no more than 4.9% of the outstanding voting stock of a publicly traded corporation shall not constitute a violation of this provision. In recognition of the fact that the Company's business is global, the territory to which the restrictions contained in this Section 5(a) shall apply shall be worldwide. The Company may waive the foregoing restrictions or their application in any particular circumstance and may condition any such waiver upon receipt of assurances satisfactory to the Company, from the Executive and/or others, that the Ex...

2024

  • (Wikipedia, 2024) ⇒ https://en.wikipedia.org/wiki/Non-compete_clause Retrieved:2024-2-28.
    • In contract law, a non-compete clause (often NCC), restrictive covenant, or covenant not to compete (CNC), is a clause under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer). In the labor market, these agreements prevent workers from freely moving across employers, and weaken the bargaining leverage of workers.

      Non-compete agreements are rooted in the medieval system of apprenticeship whereby an older master craftsman took on a younger apprentice, trained the apprentice, and in some cases entered into an agreement whereby the apprentice could not compete with the master after the apprenticeship. Modern uses of non-compete agreements are generally premised on preventing high-skilled workers from transferring trade secrets or a customer list from one firm to a competing firm, thus giving the competing firm a competitive advantage.[1][2] However, many non-compete clauses apply to low-wage workers or individuals who do not possess transferable trade secrets.[2]

      The extent to which non-compete clauses are legally allowed and enforced varies under different jurisdictions. Some localities and states ban non-compete clauses or highly restrict their applicability. In jurisdictions where non-compete agreements are legal, courts tend to evaluate whether a non-compete agreement covers a worker's move to a relevant industry and reasonable geographic area, as well as whether the former is still bound by the agreement over a reasonable time period. An employer bringing a lawsuit may also be asked to identify a protectable business interest that was harmed by the employee's move to a different firm.[2]

      Research shows that non-compete agreements make labor markets less competitive, reduce wages and reduce labor mobility. [1] While non-compete agreements may incentivize company investment into their workers and research, they may also reduce innovation and productivity by employees who may be forced to leave a sector when they leave a firm. The labor movement tends to advocate for restrictions on non-compete agreements while support for non-compete agreements is common among some employers and business associations.

  1. ↑ 1.0 1.1 Cite error: Invalid <ref> tag; no text was provided for refs named :0
  2. ↑ 2.0 2.1 2.2 Cite error: Invalid <ref> tag; no text was provided for refs named :1
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