Countersign non compete agreement template
- Hi, everyone. I'm attorney Aiden Durham with 180 Law Co in Denver, Colorado, and welcome back to all up in my messy,
disgusting moving business. Just kidding. It's All Up In Yo' Business. (upbeat guitar music) In this episode of All Up In Yo' Business, I'm gonna break down some of the basics of non-compete agreements,
tell you guys what they are, why they're important,
and kind of generally how they work in the law. But before we get into it,
please be sure to like, subscribe and share, and don't forget to check the description for some links to additional information and resources. And finally, as with
last time, I'm moving. Well, I've recently moved,
and I'm still in the process of unpacking and getting stuff organized, so ignore the terrible mess behind me and bear with me while things get
adjusted around here, okay? Thanks. So, what is a non-compete agreement? A non-compete, also known
as a non-competition, a covenant not to compete,
a non-compete agreement is a restrictive covenant
between an employer and an employee, typically,
that puts some restrictions on what the employee can do once they're no longer employed by that employer. And generally speaking,
they will restrict, in one way or the other, the employee from competing with the
employer's business. Employers use non-compete
agreements to protect proprietary information
like their trade secrets or other important
confidential information. It's not solely for the
purpose of just keeping someone from competing with you. It's more for the purpose
of protecting some proprietary or important
information of the employer. Now, non-competes aren't always between employees and employers. That's just kind of the context that I'm gonna talk about them in today, but non-competes can come
up in other situations such as business sale or purchase, or some kind of a merger or
even business partnerships. There can be non-competes
in a lot of other contexts, but generally, for the
most part, they kind of all work the same. That's tough to say, actually, because non-competes are pretty... They always work differently,
but for the most part, the things I'm gonna be
talking about will apply in employer-employee
non-compete relationships and other non-compete situations, too. So, like I said, non-compete
is typically used primarily for the benefit of the employer, and it's for the purpose of protecting the employer's trade secrets,
their intellectual property, their proprietary information,
things that this company, this employer has, that
if an employee went and took to another
company or if that employee started their own company using that proprietary
information, it could really damage the business of the employer. So that's why these
non-competes are typically used is to really just protect
the important data and the important
information of the employer that the employee may have
come into contact with or been familiar with. And a lot of times when we're
dealing with confidential or proprietary information of an employer, typically we'll also use something like a confidentiality agreement
or a non-disclosure agreement which, in itself, does help to protect that confidential information. An NDA or a confidentiality
agreement would typically put restrictions on the employee or whoever's receiving the
confidential information, and keep it so that that
person can't use or disclose that information for
any other purpose other than why it was given to
them in the first place. So, a lot of times, these
non-solicitations or... I'm sorry, these NDAs or these
confidentiality agreements will suffice to protect a good deal of employers' information,
but in situations where an employee might've
been very high level or have a lot of exposure to trade secrets or other proprietary info,
then sometimes we wanna take some extra steps to
protect that information and the business of the employer by using these restricted covenants
or restrictive covenants such as non-competes or
non-solicitation agreements. I'm not gonna talk a ton about
non-solicitation agreements in this video 'cause
that will take forever, but just so you all
know, a non-solicitation is another restrictive covenant
similar to a non-compete in that it just prohibits
someone from soliciting customers or clients or employees or other people who have been involved with the employer. So, basically, the employee
can't go in and, like, poach or take all the business. But, so, those are kind
of similar to non-competes in that sense. So, right off the bat,
it's important to say that not all non-competes
are created equal, and not all of them are enforceable. And in fact, it is very,
very dependent on your state and your jurisdiction when it
comes to the enforceability of a non-compete and
what needs to be in there in order for it to be
enforceable in the first place. Courts, generally speaking,
aren't big fans of non-competes because, for the most part, it... They recognize that it can
prevent an individual's ability to make a living and to,
you know, make an income and support their lives and all of that. So, it's not easily going to be enforced in a lot of situations. But there are certainly times
when non-competes are upheld, are completely valid and enforceable. There are, however, some states where non-competes are
invalid just by default. They're just, we don't do them unless certain circumstances exist, or except for a few certain situations. So there are some states
where, just, kind of across the board, non-competes are invalid except for certain circumstances. So, again, this is gonna
vary state by state and jurisdiction by jurisdiction,
but, generally speaking, non-competes are used for a few reasons. Number one, again, to protect
valuable, proprietary info or trade secrets. Also to help uphold the
value of the goodwill of the employer. And then, typically for reasons of, like, investing in employee
training or something. If you hire an employee
and they have no idea what they're doing, and you
have to put a lot of time and money and effort into
teaching that person what to do, training them on their entire
job, then usually, you know, you don't want that person
to then hit the road, start their own business,
competing with you using all of the skills
that you just taught them. So, those are kind of the typical reasons that a non-compete is going to be used. There are always, you
know, other situations where this comes up but, but
those are kind of generally situations of what we want to
protect with a non-compete. So, like I said, in some jurisdictions, non-competes are just, for the most part, invalid and not enforceable. In California, for example,
their state statutes say that non-competes are unenforceable in employment situations,
so an employer putting a non-compete against an
employee for the most part is unenforceable, but they do allow it in situations of a business
purchase or a merger. And, that doesn't mean that
employers in California are completely out of
luck when it comes to protecting their confidential info. Just because you may not be
able to use a non-compete with employees, you can
still protect information with those NDAs or
confidentiality agreements, too. Same goes for Colorado. Colorado is one of these
states that generally just doesn't like non-competes. In our statutes in Colorado
say non-competes are invalid and unenforceable, except in
certain situations such as the purchase of a sale,
or the sale and purchase of a business or a merger
or acquisition or situations where it is a very high
level executive position that the person may have
been exposed to a lot of very valuable or confidential information. So there are exceptions
to these rules, but, such as Colorado and California, I believe North Dakota,
Oklahoma, I think Texas probably. There are certainly a handful of states that just kind of across the
board don't like non-competes, and won't enforce them except in very specific circumstances. Speaking of Texas, if
any of you are in Texas and want to know more about non-competes, I really encourage you to
check out my friend Zach Wolfe on YouTube and on his blog. He is the Texas non-compete lawyer. I'll link to him down in the bottom, but he's one of my good
buddies from social media and a great lawyer and knows
a lot about non-competes, especially in Texas, so I recommend you guys
check him out, too. So, there's first the question of, is my non-compete
enforceable to begin with depending on your state,
your jurisdiction's laws. Then, there are gonna be
issues of certain industries where non-competes may not be enforceable. This applies a lot in the legal industry. Us lawyers, we generally can't
really restrict each other, can't use non-competes, like,
in law firms or lawyers. Because that is preventing
the general public from access to legal counsel by putting
a non-compete on me, for example, if I worked for a law firm, now people who wanted to work
with me wouldn't be able to, and that's against public policy, so in the legal profession, non-competes are pretty frowned upon. Same goes with the medical profession. Again, courts don't want to prevent people from seeking medical
attention or being able to get medical attention
from their preferred doctor, so putting non-competes on
medical professionals typically, in a lot of states, is not gonna work or is gonna be pretty hard to enforce. There are also some jurisdictions
that have restrictions on non-competes with
regard to low wage workers or minimum wage workers, so,
in some states if the worker is being paid, you know, the
federal or state minimum wage, then those non-competes are
gonna be largely unenforceable. But again, all of this is
very dependent on state law and your jurisdiction, so
if you've got questions about your particular
state's non-compete laws or how they might be enforced, I really encourage you to
talk to a lawyer in your state about that because I don't
know the laws of every state, and even if I did, I
wouldn't wanna spend a video talking about all of them 'cause that might be a little boring. But, anyway, you guys get the point. So, now that we know kind of a little bit about what a non-compete is, what it does, how it may or may not be enforced, let's talk about how we
actually make one that will hopefully be upheld
and valid and enforceable. So, a non-compete agreement
is a contractual obligation, and so, by virtue of that,
it has to contain things that create a contract. In a nutshell, a contract,
legally speaking, is an agreement between two parties, and there has to be some form
of consideration, which is, like, one party giving
something up in exchange for what they might be receiving. Again, I don't wanna go super into this because it's pretty detailed, but in order for it to be a
valid, enforceable contract, there has to be a bargain
for exchange and some form of consideration, which, typically, in the employer-employee
context would be, like, getting a job or giving up the
ability to fire an employee if there's some sort of employment term or something in the contract. In a lot of jurisdictions,
employment is at will, which means that an employee
can quit or can be fired at any time for any
reason or with no reason. And so, in those situations, sometimes the promise of continued
employment will be sufficient consideration
to uphold a non-compete. Sometimes it won't. Again, it all really
depends on the jurisdiction. But, kind of, the idea
to think about is that in exchange for agreeing not to compete, I am receiving the benefit of employment. And so all states where
non-competes are enforceable, all states have placed
some restrictions on what exactly can be
restricted in the non-compete. And, generally, non-competes
have to be reasonable in scope as far as duration
and geographic reach of the non-compete. And again, this is because
there's this balance between wanting to protect the employer's confidential information,
but also wanting to protect the employee's ability to
work and to make a living. So, when we are trying to enforce these, one of the big first
questions is going to be, is the duration and scope of
the non-compete reasonable? And what is reasonable? Again, depends on your jurisdiction. It's always going to
be a little different, what's reasonable here,
what's reasonable there. But, so, for example, a
commonly phrased non-compete might say that the employee
won't be involved with or own or have an interest in
a competing business for the duration of one
year within the state of wherever the employer is operating. Or, maybe a term of
two years within the... within 50 mile radius of any of the employer's office locations. Something like that. Again, they're really customizable. It can be drafted however
the situation fits, but the purpose, the idea
is keeping it reasonable. And a lot of times if the
duration is really high, so, if we're trying to restrict
someone for five years, then the geographic scope
needs to be relatively low, and vice versa, if we wanna
put a big geographic scope, like you can't compete
anywhere in the United States, then we need to keep the
duration pretty low, like, for a month, just for example. Most courts, generally
speaking, will enforce non-competes with scopes up to two years. That's kind of the time
frame that I hover around when I'm working on
non-competes for my clients. We know that two years,
in a lot of situations, is considered reasonable. But, again, it also has a lot
to do with the scope of the... the geographic scope of the restrictions and it really depends on the circumstances in
particular of the employee. If they were a very high level
employee that had their hands in a lot of things and
had a lot of exposure to proprietary information, then that standard of reasonableness
is gonna be a bit higher. But if it's like an administrative level where the employee didn't
have a whole lot of exposure to confidential information,
or if their role was smaller, or if their time with the
employer was very short, then the same things that would fit for that high level employee
wouldn't necessarily fly for that lower level employee. So, it's a delicate balance of
a million different factors, but primarily based on the
reasonableness of the scope and duration of the non-compete. And then, the reasonableness
of the geographic scope is also gonna be really dependent
on the employer's business and where the employer does business, where their office or offices are located. There's gonna have to be
some, you know, genuine, real connection between
this geographic scope and what the employer actually does. If you're, you know, a brick
and mortar store or a office in one city, and your
entire client base is really in that city, then you're
gonna have a hard time putting any non-compete
restrictions that keep employees from competing outside of your state, if, even really outside of that city. So, it has to be reasonable in light of the employer's
circumstances, too. Now, of course, in our modern world, it's pretty common for
companies to be Internet-based and not have a physical
location or work with people all over the country or
all over the world, and so, sometimes having a geographic scope doesn't really make sense
because it's all over. And so, again, state, every
jurisdiction is different, but there are situations
where a non-compete can still be valid and enforceable if it doesn't have a geographic scope, so if we're a virtual, worldwide company, we can potentially put a
restriction for employees not to compete with us anywhere
in the world, but, again, it has to be kind of
balanced with the scope or the duration of the
restriction, and typically, we wanna be a bit more specific with regard to what competing is. So, again, if we're gonna
be kind of on the higher end of reasonableness with scope or duration, then we might wanna be really specific as to what competing means,
and be very limited with, this is the specific type of
business or business operation or company that would
be considered competing. So, it still allows the employee
to do similar types of work or continue in their same
field of employment, but, except for, maybe, particular, specific fields or industries. So, as you guys may have picked up, it's kind of tough to talk
about non-compete agreements because they are different in every state, every situation, just like
everything with the law. But, really, non-competes
and restrictive covenants like non-solicitations very
much vary state by state. And so, if you need help
or if you have questions or if you're looking for
information about non-competes or non-solicitations, it's super important that you consult with an
attorney in your state. But overall, for the most
part, non-compete agreements are a great way to protect your business' intellectual property, proprietary information,
and to kind of protect the goodwill and the potential
outcome for your business. But, so, if you're in a
state or in a situation where a non-compete isn't going to apply, or probably won't be
enforceable, then, again, using an NDA, a non-disclosure agreement, or a confidentiality
agreement is going to be a very good way of still protecting that confidential information without risking an
unenforceable non-compete. And here's kind of a common conversation that I have with a lot of my clients. In Colorado, again, non-competes
are, for the most part, frowned upon, and unenforceable unless certain circumstances exist. And I'll tell my clients that, but often they will still
want to do it, and so... And I have this conversation a lot in consultations and stuff, too. The idea is that, sure we
can write this non-compete. If you wanna keep some
employee from competing if they quit or if they're
fired, we can write it. We can put it in the contract. I'm going to do everything
I can to make sure it's enforceable, but if the
employee tries to challenge it, or if the employee competes
and we try to enforce it, there's a good chance
it's not gonna be upheld. And I have to tell my clients that a lot because I'm their advisor. I'm telling them what
they can and can't do, but they're still in the driver's seat, and if they want a
non-compete in their agreement or in their contract,
I can tell them about why it probably won't work, but
we can still put it in there and hope that if the need arises that it would actually be enforceable. And that's a situation
that I see a lot because we don't know if a non-compete's
going to be enforceable until we try to enforce it, so, again, when it comes to non-competes, there's a lot of moving pieces and a lot of different factors. That's all for this episode, folks. Drop a comment below. Let me know what you think. Again, please don't ask me questions about your state's issues, or don't ask me questions about your non-competes, because they're all gonna be different. I don't know all the states' laws. I don't know all the laws, so talk to an attorney in your state if you have questions
about enforcing or drafting or how to handle a non-compete agreement. Thank you all so much for watching. I'm Aiden Durham, and
I'll see you next time. (relaxing music)