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Importance of Non-Compete Provisions

written by: KLeeBanks•edited by: Linda Richter•updated: 5/22/2011

Independent contractors are no doubt familiar with non-compete clauses or provisions within contracts. Some businesses also require employees to sign contracts with non-compete provisions. This step ensures that current or past employees or contractors do not accept work with competitors.

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    As an employee or independent contractor with certain clients or businesses, it is to your advantage to obtain a written contract or Shake Hand Image by JSCreationzs on agreement that clearly defines the terms of the job or project. In addition, watch for non-disclosure clauses or provisions. Ascertain that you understand and agree with the terms as defined. You must agree with the non-compete provisions stated for your company’s or client’s sake, as well as for your professional reputation.

    Image Credit: FreeDigitalPhotos, jscreationz

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    Why Are Non-Compete Provisions Necessary?

    Certain types of businesses and clients choose to safeguard their companies against similar, competing businesses. Companies that require signed contracts with non-compete provisions do so to prevent employees or independent contractors from providing their services to competing businesses. Companies often want to protect the following areas of business:

    • Client lists
    • Company procedures
    • Innovative procedures or inventions
    • New technology
    • Trade secrets
    • Other proprietary information

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    What Stipulations Do Non-Compete Provisions Cover?

    While non-compete provisions will vary based on each individual company’s or client’s needs, certain stipulations are common. Typically, when you sign a contract with non-compete provisions, you must agree to some or all of the following points:

    • You will not provide similar skills or services to a competing business.
    • You will not provide similar skills or services within a specified geographical area.
    • You will not independently work for the company’s clients while you are employed or contracted with the company.
    • You will agree to all of these stipulations for a period of one to two years (whatever the non-compete clause states).
    • You will agree to all of the above after you leave the company or complete the project.
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    Examples of Non-Compete Provisions

    If you have never seen or signed a non-compete provision, here are some examples (retrieved from various contracts retained by the writer of this article):

    • Example 1. Because of the trade secret subject matter of [Business], you covenant and agree that, during the term of this Agreement and for a period of one (1) year thereafter, you will not solicit the services of any of [Business]’s employees, contributors, content providers, suppliers or customers for your own benefit or for the benefit of any other person or entity.
    • Example 2. The Parties hereby agree as follows: That [Independent Contractor] shall not directly or indirectly compete with the business of [Business] and its successors and assign during the period of independent contract services and for one year following termination of independent contracting services and notwithstanding the cause or reason for termination. [Independent Contractor] acknowledges that [Business] shall or may in reliance of this agreement provide [Independent Contractor] access to trade secrets, customers, and other confidential data and that the provisions of this agreement are reasonably necessary to protect [Business] and its good will. [Independent Contractor] agrees to retain said information as confidential and not to use said information on his or her own behalf or disclose same to any third party.
    • Example 3. During [Employee]’s employment and for twelve (12) consecutive months immediately following the termination of [Employee]’s employment with [Business] for any reason (whether voluntary or involuntary), [Employee] agrees that he/she: (1) will not request, induce, or attempt to induce any Client to terminate its relationship with [Business]; (2) will not attempt to hire, attempt to employ, attempt to associate in business with or successfully hire, employ or associate in business with any person employed by [Business] or any person who has left the employ of [Business] within the preceding three months, or discuss any potential employment or business association with such person, regardless of who initiates the discussion or how the person comes to the [Employee]’s attention; (3) will not solicit, contact, perform or offer to perform any ***** services to any Client (other than on behalf of [Business]) or other person, entity, or business engaged in providing any type of ***** services without the express written approval of the President of [Business].
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    Difference Between Non-Compete and Non-Disclosure Clauses

    You may wonder about the difference between non-compete and non-disclosure clauses or provisions. As described in this article, non-compete clauses or provisions require that employees or independent contractors not engage in any activities that would compete with their contracted company. Likewise, some contracts also include non-disclosure clauses for similar reasons. If a contract has a non-disclosure clause, it typically requires that employees or independent contractors do not reveal to anyone outside of the company the same information discussed in the section on page 1 entitled, Why Are Non-Compete Provisions Necessary?

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    As an employee or independent contractor, you may have to sign a contract that contains a non-compete provision. The main purpose of the clause is to safeguard proprietary information from similar, competing companies. Make sure you understand and agree with the stipulations described in the non-compete clause for your contracted company’s sake, as well as for your professional reputation.


    Quintessential Careers. Dealing with Non-Compete Clauses and Agreements. Retrieved from