Non-compete agreement forms help small businesses safeguard their trade secrets. Companies can protect recipes, client base, industrial and manufacturing secrets that competitors could use to gain an edge in business. No employer wants to waste time and money training employees only to have them defect to the competition, often with access to valuable information that your competitors could use to their advantage.

Small business owners must be careful when introducing a noncompete clause to employees. A vital aspect of noncompete contract agreements is the contract has to relate to the area of business between the employee and employer. To be enforceable in a court of law the noncompete contract can’t place undue restrictions on an employee that would prevent them from being able to work in their profession. Regardless of the clauses included in your noncompete agreement their enforceability depends on the state where you conduct business. Before getting employees to sign a non-compete clause, consider the following:

1. Seek to establish a noncompete agreement that covers particular issues that relate to your type of business.

2. Design a customized form that fits your state and small business needs.

3. Consult with a lawyer to create a reasonable non-compete agreement.

Action Steps
The best contacts and resources to help you get it done

Access a broad range of noncompete forms

Review the protection offered by noncompete agreements. Depending on your business and employees' access to confidential information, you may be able to use standard forms. Select a noncompete agreement that can keep your business information confidential.

I recommend: Download a noncompete contract designed for use in your state at FormsGateway.com. Legalmessenger.com offers noncompete agreement forms bundled with non-disclosure and other employment forms. Customize noncompete agreements and other forms with Business Attorney software from H&R Block.

Narrow down specific standards to include in noncompete agreements

Understand the type of restrictions usually included in a noncompete agreement. Review a variety of samples of non-compete forms to create reasonable restrictions that make sense for your small business. Also, determine which employees should sign noncompete agreements.

I recommend: Business Owner's Toolkit provides examples of effective language to use in noncompete contract agreement. Lawyer Central's non-compete agreement video offers valuable information on creating an enforceable form. Order the audio seminar from HRhero.com to learn how to create multi-state noncompete forms that are enforceable.

Contact a lawyer in your state to discuss non-compete agreement forms

Enforceability of noncompete contract forms varies by state. Discuss your business and trade secrets with a local employment lawyer to ensure your agreement can stand up in court.

I recommend: Review employment lawyers by city or state at FindLaw. Locate lawyers specializing in non-compete contract agreements by state and compare law firms at martindale.com.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  A few states, including CA, consider non-compete forms to be illegal in most cases.
• •  A noncompete agreement must include a restricted duration, typically no longer than a year, in order to be enforceable in court.

Company secrets and valuable business knowledge can be protected by noncompete agreements between employers and their employees. These contracts or clauses are legal agreements that dictate what company information can and can't be used by current or former employees.

Noncompete agreements are more necessary today than ever because of advancing technology. Client information, company-specific software and intellectual property available to employees need the protection afforded by successful noncompete agreements. The trick is creating an agreement that is enforceable.

An enforceable agreement contains the following characteristics:

1. The agreement has reasonable terms for both the employer and employee
2. It contains precise wording that specifies what exactly is protected
3. It is signed by all applicable employees, preferably upon hiring
4. It pays attention to specific state guidelines as to what can and cannot be protected

Make sure you have a concrete, legal agreement to present to employees that will guard your company's valuable information.

Action Steps
The best contacts and resources to help you get it done

Choose an applicable type of agreement

There are four basic types of noncompete agreements. The classic noncompetition agreement forbids an employee from working for a competitor or directly competing against the employer after termination. Nonsolicitation agreements prevent employees from otherwise soliciting the employer's clients. Nondisclosure and confidentiality agreements deal more with intellectual property and promise that information learned will remain secret. Confidentiality refers to the employer's discretion as well.

I recommend: Begin with a LawDepot sample noncompete agreement. See if the sample fits your business and modify as necessary. Other sample forms are available at CCH, SmartBiz.com, Envision SBS and Internet Legal Research Group.

Be specific about what is protected

Noncompete agreements protect trade secrets; for example, information that is not general knowledge or is specific to your company. Broad statements about 'company information' do not hold up well in court. Specific examples of hardware, client lists or blueprints make an agreement that is easier to protect.

I recommend: Use design tools at Designers Toolbox to hone your agreement. If possible, have the agreement checked by an attorney. While drafting your agreement, refer to My Employment Lawyer or MedLawPlus for frequently asked questions.

Consider duration and penalties

Thou shalt never compete until the end of time is an unreasonable noncompete agreement. Enforceable noncompete agreements usually cover one to three years after the term of employment. A successful agreement is reasonable in duration and scope, and is beneficial to both employee and employer.

I recommend: State-specific legal forms at LawGuru outline what guidelines apply to noncompete agreements in your home state. Use this information to draft a fair and thorough document.

Make sure applicable parties sign the agreement

Not all employees need to sign a noncompete agreement. Mailroom clerks with no access to valuable information do not need to sign an agreement. If the head of IT (or other employees with access to trade secrets) does not sign an agreement, however, you can take no action against them if they use your company's knowledge against you in the future.

I recommend: Learn who needs to sign noncompete agreements and what exactly they are prevented from doing at Entrepreneur magazine. A general rule is to present the agreement to employees who have enough company information to quit and start up a rival business against you.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Though noncompete agreements were initially popular with mostly high-tech companies, today they are relevant in numerous industries.
• •  A noncompete agreement does not uniquely consider employees. A successful agreement protects employers and employees alike, preventing damaging lawsuits.
• •  A good relationship with your employees goes far toward building trust, which is the best way to ensure the success of your agreement.
• •  Have a lawyer draft the agreement, or at least look it over. Noncompete agreements can be unpopular with certain state courts and difficult to enforce.

Noncompete agreements are put into place to prevent one party, typically an employee, from going after a similar position with a competitor, typically a competitor of the employer. Traditional contract requirements apply to noncompete agreement forms, an example of which is the consideration doctrine. Such clauses are put in place based on the supposition that should the employee be terminated or resign, they may look for employment from a competing business and might possess some kind of advantage because of the confidential information they gained by working at the contract-issuing employer.

However, this does not mean that businesses may abuse their noncompete contract agreements. There are a number of noncompete agreements laws and regulations put into place to protect both the employees and the employers who would take part in noncompete contract agreements. To protect themselves, businesses and employees can gain pertinent information if they:

1. Learn about state laws regarding noncompete clause options.

2. Educate yourself about federal information with respect to noncompete contract forms, non-compete contract agreements and noncompetiton.

3. Read through legal websites and forums in order to get information, make comments and ask questions about non-compete agreement and non-compete clause options.

Action Steps
The best contacts and resources to help you get it done

Examine the laws of noncompete contract agreements on a state-by-state basis

It is important to review the state laws regulating non-compete agreement forms in each business' state of residency. These laws and regulations will vary from state to state and businesses need to be aware of the differences which occur across state lines when it comes to noncompete clause and contract write-ups.

I recommend: While written for employees, businesses as well can get valuable information from MyEmploymentLawyer.com including an introduction to state enforcement of noncompete clauses. Basic information for every state allowed to practice noncompete agreements can be found at Lawyers.com, including the duration of time such clauses would be in effect, the 'blue pencil rule', and the distance, scope or span of such an agreement.

Review federal concepts and ideas for information about Noncompete Agreements Laws and Regulations

There are no federal laws with respect to noncompetition agreement options and contracts. However, there are some instances in which the United States Supreme Court will rule on noncompete contract agreements and the regulation or enforcement of noncompete agreement forms.

I recommend: IssuesNY.com discusses the fact that there are no federal laws to govern noncompete agreements, as well as the states which do not allow such contracts and those which do. WOAI.com also discusses what businesses should do in lieu of a lack of federal regulation. PhysiciansNews.com discusses the recent work done in court systems to work with noncompete agreements in the field of medicine. Non-Competes.com discusses a recent federal court's action in a noncompete case in the state of Pennsylvania, illustrating how the federal legal system may approach such conflicts.

Peruse legal venues online for information and comments about noncompete contract regulation

A great deal of information can be found regarding noncompete contract forms at legal websites. For visitors who have questions or specific comments, some of the most beneficial websites are blogs and discussion boards or forums. However, there are a number of sites that can help with this information and personal preferences will come into play when it comes to choosing the most comprehensive non-compete forms and noncompete agreements rules, regulations and information pages.

I recommend: Information about traditional contract requirements, to which noncomplete clauses must adhere, can be found at ILRG.com, where a properly worded noncompete form can be found. Meanwhile, Law.com discusses what the legal counsel of every corporation needs to know regarding noncompete agreements. MBBP.com discusses how such agreements might be enforced, assuming that they could be. By logging in, users can get more detailed information regarding the enforcement of such clauses and agreements from TheHRSpecialist.com, a beneficial resource for many businesses with human resource questions and concerns.