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Covenant Not To Compete Form Template for United States

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Key Requirements PROMPT example:

Covenant Not To Compete Form

"I need a Covenant Not To Compete Form for a senior software engineer in California who will be leaving our company in March 2025, with particular focus on protecting our AI development projects and customer relationships for a 12-month period."

Document background
The Covenant Not To Compete Form serves as a critical tool for businesses to protect their legitimate interests, including trade secrets, confidential information, and customer relationships. This document has become increasingly important in today's mobile workforce environment, particularly in industries with high employee turnover or access to sensitive information. While its enforceability varies by U.S. state jurisdiction, with some states imposing strict limitations or prohibitions, it remains a standard practice in many employment relationships. The agreement typically includes specific terms about duration, geographic scope, and prohibited activities, and must be carefully drafted to comply with applicable state laws and recent legal developments regarding employee mobility rights.
Suggested Sections

1. Parties: Identification of the employer and employee entering into the agreement

2. Background: Context for the agreement including employment relationship and business interests

3. Definitions: Key terms used in the agreement including competitive activities, confidential information, and territory

4. Restrictive Covenants: Core non-compete provisions including duration, geographic scope, and prohibited activities

5. Consideration: What the employee receives in exchange for agreeing to the restrictions

6. Term and Termination: Duration of the agreement and circumstances for early termination

7. Governing Law: Specification of which state's laws govern the agreement

Optional Sections

1. Non-Solicitation Provisions: Additional restrictions on soliciting customers or employees, used when business relationships need protection

2. Garden Leave: Provisions for paid leave during restriction period, used in senior executive agreements

3. Training Cost Recovery: Provisions for recovering training investments, used when significant training is provided

4. Blue Pencil Clause: Allows court modification of invalid provisions, used where state law permits

Suggested Schedules

1. Territory Definition: Detailed description or map of restricted geographic area

2. Competitor List: Specific companies or business types considered competitors

3. Consideration Schedule: Details of compensation or benefits provided as consideration

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈ˰æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Clauses















Industries

State-Specific Laws: Non-compete laws vary significantly by state with some states like California largely prohibiting them, while others impose specific duration and geographic scope limitations. Recent state law changes have increasingly restricted non-competes.

Federal Regulations: Key federal considerations including the FTC's proposed rule to ban non-compete agreements, federal antitrust laws, and relevant federal employment laws.

Enforceability Requirements: Essential elements for legal enforceability including legitimate business interest protection, reasonable time restrictions, reasonable geographic scope, reasonable scope of prohibited activities, and adequate consideration for employees.

State-Specific Restrictions: Various state-level restrictions including income thresholds for lower-wage workers, professional restrictions, notice requirements, and blue pencil provisions allowing courts to modify terms.

Current Legal Trends: Recent developments in non-compete law including growing restrictions, increased scrutiny of overly broad agreements, and greater emphasis on employee mobility rights.

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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