Non-Compete Agreement Template (Free Download + AI Generator)

A non compete agreement is a contract in which one party — usually an employee, contractor, founder, or seller — promises not to compete with another party for a limited time, within a defined geography, and in a particular line of business. In the U.S., these terms are increasingly controversial: some states restrict or even ban them, federal agencies scrutinize them, and courts often strike down provisions that go too far. Used carefully, this type of restriction can protect trade secrets and customer relationships; used carelessly, it can be unenforceable or even invite regulatory attention.

Today, employers, investors, and professionals all need to understand when a noncompetition agreement is appropriate, what the law in their state allows, and how to draft one that is narrow, fair, and defensible.

TL;DR

• This document restricts certain competitive activities for a defined time, place, and business scope after a relationship ends.
  
  

• State law largely controls whether and how these restrictions can be enforced, and many states now limit or ban them for employees.
  
  

• Overbroad or boilerplate language can render the restriction unenforceable and, in some cases, attract scrutiny from agencies like the Federal Trade Commission and the National Labor Relations Board.
  
  

• A structured template and AI-assisted drafting tools can help you narrow the scope, document your legitimate business interests, and generate versions tailored to different states or roles.

You Might Also Like:

• Credit Application Template: Trade References + Safe Use Guide

• Name Change Petition Template (Free Download + AI Generator)Name Change Petition Template (Free Download + AI Generator)

Disclaimer

This guide is for general informational purposes only and does not constitute legal advice, a legal opinion, or a substitute for advice from a licensed attorney. Noncompete law changes rapidly and varies widely by state, industry, and individual circumstances. Always consult a qualified lawyer in your jurisdiction before drafting, signing, or attempting to enforce any restrictive covenant.

Who Should Use This Document

This contract is most often drafted by businesses, but both sides need to understand it. Employers, staffing firms, and buyers use it to protect investments in confidential information, customer relationships, and training. Key employees, executives, independent contractors, and sellers of a business may be asked to sign one in connection with an employment agreement, equity grant, or sale transaction.

Because state rules vary widely — from near-total bans to relatively permissive regimes — this document is best for situations where there is a clear business interest, the worker has meaningful bargaining power or compensation, and narrower tools (like nondisclosure or non-solicitation terms) are not enough. It is generally a poor fit for low-wage workers or standard hourly roles, where many states and regulators treat such restraints as abusive.

Typical use cases by user type:

What Is a Non-Compete Agreement?

In U.S. law, a non compete agreement (also called a noncompetition agreement or covenant not to compete) is a contract where one party promises not to engage in certain competitive activities against another party for a limited period of time. The Legal Information Institute and its companion entry on covenant not to compete describe it as an agreement not to increase competition for the other party — typically by working for a competitor, starting a rival business, or using sensitive information in ways that would undermine the former employer.

These clauses often appear in employment contracts, independent-contractor agreements, partnership or shareholder agreements, and business-sale documents. A practical overview from Thomson Reuters notes that such covenants are most common in sale-of-business deals, executive employment, and professional services where goodwill and confidential know-how are central to value. The basic structure is that one side gives up certain competitive options in exchange for something of value, such as a job offer, equity, or a purchase price.

The exact legal meaning and enforceability of a noncompetition agreement depend heavily on state law. Some states apply a “reasonableness” test to the duration, geography, and scope; others (like California and a growing list of jurisdictions tracked in the State Noncompete Law Tracker) sharply restrict or ban them for employees. Federal competition and labor agencies have also weighed in: the Federal Trade Commission’s materials on its Noncompete Rule and the NLRB General Counsel’s memo on noncompetes highlight concerns about restraints that unduly limit worker mobility.

Because of this patchwork, modern practice treats noncompetition language as one tool in a broader “restrictive covenant” package — used sparingly, tailored to real business interests, and calibrated to the specific state, industry, and role involved.

When Do You Need a Non-Compete Agreement?

From an employer or buyer’s perspective, this kind of clause is usually considered when you are sharing valuable, non-public business information and worry it could be used to compete directly against you. Typical triggers include hiring senior employees with access to trade secrets, signing high-level independent contractors or partners, or buying a business where the seller could easily reopen and take back customers. Overviews from the Legal Information Institute, policy trackers like the State Noncompete Law Tracker, and practice notes collected by the National Law Review all stress that noncompetes should be targeted to specific roles and risks, not used across the entire workforce.

For many other situations, narrower tools — confidentiality clauses, non-solicitation of customers or staff, and robust trade-secret programs under laws like the federal Defend Trade Secrets Act and state Uniform Trade Secrets Acts — are safer and often sufficient. Federal competition and labor regulators have repeatedly warned against broad employee noncompetes: see the Federal Trade Commission’s noncompete materials and the NLRB General Counsel’s memo on noncompetes and Section 7 rights.

From a worker’s standpoint, you “need” to pay attention to a non compete agreement whenever it appears in an offer letter, promotion package, equity grant, or severance deal — especially if it seems to bar you from working in your industry for more than a short period or over a very broad territory. Practical guides from sources like Nolo and public-interest fact sheets such as NELP’s FAQ on non-compete agreements recommend getting local legal advice before signing or before assuming you are “stuck” under an existing clause, because non compete agreement law varies dramatically by state and is changing quickly.

Related Documents

Noncompetition language rarely stands alone. It usually appears with other contractual protections that work together to manage risk.

What Should a Non-Compete Agreement Include?

While formats vary by company and state, most well-drafted documents cover the same core elements. A clear, modular structure helps courts and regulators see that you are protecting narrow business interests rather than trying to block ordinary competition. Resources like the Legal Information Institute, the State Noncompete Law Tracker, and practice notes in the National Law Review point to similar building blocks.

• Identifies the parties, roles, and business being protected.
  List the company’s full legal name, the individual’s name and position (employee, contractor, member, seller), and a short description of the relevant business or line. Tying the clause to a specific entity or division makes the scope of any non compete clause easier to justify.
  
  

• Describes exactly what conduct is restricted.
  Spell out what “competing” means: working for named competitors, starting a similar venture, owning a stake in a rival, or serving in particular roles. Guidance from the Legal Information Institute and practical overviews from sources like Thomson Reuters emphasize that focused prohibitions tied to the person’s actual duties are more defensible than vague bans on “any competitive activity.”
  
  

• Limits the duration and territory to reasonable bounds.
  Courts scrutinize multi-year or worldwide restrictions that outlast the value of confidential information. State summaries such as the Economic Innovation Group tracker and bar-association primers show courts expect time and geography to track the markets, customers, and information the worker actually touched.
  
  

• Explains the legitimate business interests being protected.
  Briefly link the restraint to trade secrets, specialized training, or customer goodwill. Trade-secret resources from the Legal Information Institute, commentary on the federal Defend Trade Secrets Act, and discussions of the Uniform Trade Secrets Act underline that courts expect real secrecy measures, not just broad noncompetition language.
  
  

• Specifies the consideration for agreeing to the restriction.
  In many states — especially for existing employees — continued employment alone may not be enough. The contract should state what the worker receives (offer, promotion, raise, equity, bonus, purchase price). State-law overviews in the National Law Review and policy summaries collected in the FTC’s noncompete materials stress that clear, contemporaneous consideration makes enforceability more likely.
  
  

• Coordinates with non-solicitation and confidentiality covenants.
  If you also use a non solicitation agreement or NDA, explain how they interact. The Federal Trade Commission and public-interest groups like NELP in their noncompete FAQ often point to non-solicitation and trade-secret law as narrower alternatives, so a coordinated package that emphasizes confidentiality and limited solicitation is usually easier to defend than a broad stand-alone ban.
  
  

• Includes state-specific savings clauses, choice of law, venue, and notice.
  Many agreements pick the employer’s home-state law and forum, but that choice may not be honored if it conflicts with worker-protective statutes in the employee’s state (for example, California or Minnesota). State-by-state charts (such as the EIG map and law-firm surveys) show that some jurisdictions also require advance notice or wage thresholds. A carefully drafted choice-of-law and forum provision, plus severability or “blue-pencil” language, and a recital that the worker had time to consult independent counsel help preserve narrower parts of the clause if a court trims the rest.

Legal Requirements and Regulatory Context

There is no single nationwide statute governing every non compete agreement. Enforceability is largely a matter of state law, layered over federal agency policy and trade-secret statutes. General overviews from the Legal Information Institute, the State Noncompete Law Tracker, and the National Conference of State Legislatures all confirm that each state sets its own rules.

Most states apply some form of “reasonableness” test — looking at duration, geography, and scope, plus whether the restraint is necessary to protect legitimate business interests and not unduly harmful to workers or the public. (National Law Review overview) A growing group of states, including California, Oklahoma, North Dakota, and Minnesota, broadly prohibit employment-based noncompetes with limited exceptions, as reflected in statutes such as Cal. Bus. & Prof. Code §16600 and multi-state charts compiled by bar associations and policy groups. Others use wage thresholds, advance-notice rules, or special protections for professions like healthcare.

At the federal level, the Federal Trade Commission issued a Non-Compete Clause Rule, published in the Federal Register, that would have banned most post-employment noncompetes. Federal courts blocked the rule, and by late 2025 the FTC dropped its appeals; law-firm analyses such as Crowell & Moring’s update explain the agency’s shift back to case-by-case enforcement under Section 5 of the FTC Act. The National Labor Relations Board’s General Counsel has likewise argued that some noncompetes can violate employees’ Section 7 rights, as outlined in the NLRB GC memo.

At the same time, federal and state trade-secret laws — such as the Defend Trade Secrets Act and state Uniform Trade Secrets Acts — offer strong remedies for misappropriation. Agencies and public-interest groups, including the FTC in its proposed rule materials and NELP in its noncompete FAQ, often point to these statutes plus NDAs and non-solicitation clauses as narrower alternatives to broad restraints on worker mobility. Because legislatures keep revising these rules and enforcement priorities shift, anyone drafting or signing such a restriction should confirm current state law — using tools like the EIG map and recent practitioner updates — and consult a qualified local attorney for high-stakes decisions.

Common Mistakes When Drafting a Non-Compete Agreement

Even sophisticated businesses fall into predictable traps when they copy-paste language from an old form or an online sample.

• Writing sweeping, one-size-fits-all restrictions that go far beyond what’s needed.
  Overly broad noncompete clauses that cover every role, every competitor, or very long periods are more likely to be struck down or ignored by courts. States that still enforce these clauses look for a tight connection between the restraint and concrete business interests; several others now ban or sharply limit noncompetes for most workers.
  
  

• Ignoring state-specific bans, wage thresholds, and notice rules.
  A clause that might be enforceable in one state can be void — or even create liability — in another. For example, California and a few other jurisdictions generally prohibit employment noncompetes, while many states bar them for workers below certain income levels or require advance notice before an existing employee signs. Reusing the same covenant not to compete across all U.S. offices without state customization is a major compliance risk.
  
  

• Relying on noncompetes instead of building a trade-secret and confidentiality program.
  Courts and regulators increasingly expect employers to rely on NDAs, security practices, and trade-secret laws (like the Defend Trade Secrets Act and state Uniform Trade Secrets Acts) rather than blanket bans on worker mobility. If your company cannot show that it actually treats information as secret, a judge may question whether a broad noncompetition clause is really necessary.
  
  

• Applying the same terms to low-wage or front-line workers.
  Many recent reforms specifically target noncompete clauses for low-wage employees, healthcare workers, or interns. Using the same form for executives and entry-level roles can violate wage-threshold statutes and trigger agency enforcement.
  
  

• Failing to coordinate noncompete terms with non-solicitation, IP, and severance provisions.
  Restrictions on competition, solicitation, disparagement, and IP ownership work together. When they are scattered across multiple documents without cross-references — employment contracts, equity plans, severance agreements — it becomes harder to show what the parties actually agreed to. A coherent package is easier to enforce and less likely to surprise a court or a worker.
  
  

• Not giving signers time, information, or legal advice.
  Springing a non compete agreement form on an employee on their first day, with no chance to review or negotiate, is risky. Some states require advance notice or consideration beyond continued employment, and agencies scrutinize contracts that appear to exploit unequal bargaining power. Encouraging workers to seek their own non compete agreement attorney — and documenting that opportunity — helps show the agreement was entered into knowingly and voluntarily.

How the AILawyer.pro Non-Compete Agreement Template Helps

Drafting this type of document from scratch can be intimidating, especially with laws changing so quickly. A structured, guided template helps you focus on the decisions that matter — who is covered, what conduct is restricted, and how the clause will operate in a specific state and role — rather than wrestling with legal boilerplate.

The AILawyer.pro Non Compete Agreement Template is organized around the key elements courts and regulators look for: clear party definitions, a tailored description of competitive activities, reasonable time and territory limits, and a concise statement of the legitimate business interests you are protecting. Built-in prompts remind you to consider wage thresholds, state prohibitions, and alternatives like non-solicitation and confidentiality clauses.

With AI-assisted drafting, you can generate variations for executives, sales staff, independent contractors, or business-sale scenarios, and then adjust the language to match your risk tolerance. Instead of copying an old sample, you can produce a fresh, internally consistent draft that is easier for your local attorney to review and refine. This saves time, reduces errors, and helps ensure your restrictions stay narrowly focused on genuine business needs.

Practical Tips for Completing Your Non-Compete Agreement

Before you fill anything in, clarify exactly what you are trying to protect and whether this type of restriction is allowed for this worker in this state. State-by-state summaries (such as the State Noncompete Law Tracker) and plain-language overviews like the Legal Information Institute’s entry on noncompetes or Nolo’s guide to noncompete agreements and the law are good starting points, but they are not a substitute for local legal advice.

As you draft on the employer side:

• Map the actual role to the restricted activities. Use real examples of competitors, products, or customer segments, and keep the clause aligned with those.

• Choose a time period that matches how long confidential information or goodwill really stays sensitive; many practice notes, including those summarized in the National Law Review’s overview, emphasize that shorter, targeted durations are more defensible.

• Define territory based on real markets (regions, states, or territories where the person actually worked) rather than “worldwide.” Policy trackers and enforcement materials — such as the FTC’s noncompete rule resources and the NLRB General Counsel’s memo on noncompetes and Section 7 rights — highlight that overly broad bans are especially suspect.

If you are reviewing a clause as an employee or contractor:

• Read all related documents: the main employment or contractor agreement, any equity or bonus plans, and separate NDA or non-solicitation terms. Guides like NELP’s noncompete FAQ suggest looking at the package as a whole, not just one paragraph.

• Ask concrete questions: for example, whether the restriction applies only to named competitors or to the entire industry, and whether it blocks you from any role or only similar roles. Nolo’s step-by-step article on how noncompetes work offers useful question prompts.

• Consider whether a narrower alternative — such as a non-solicitation or confidentiality clause — could address your employer’s concerns with less impact on your future career. Public-interest resources and agency commentary often point to these tools as better-tailored options.

For independent contractors, double-check that any restrictions are consistent with genuine contractor status; a clause that tightly controls where, when, and for whom they can work may undermine that classification. Trade-secret explanations from the Legal Information Institute and discussions of the Defend Trade Secrets Act show how confidentiality and IP provisions can often do most of the work without sweeping noncompetes.

Given rapid legal changes — new state statutes, court decisions, and shifting FTC/NLRB priorities — have a local lawyer review high-stakes restrictions, especially for executives, physicians, key engineers, or business-sale deals. You can use referral tools like the American Bar Association’s Find Legal Help or your state bar’s lawyer-referral service to locate an employment or business attorney familiar with current noncompete law in your jurisdiction.

Checklist Before You Sign or Use the Non-Compete Agreement

Before you finalize this document, make a quick pass through the essentials. Confirm that the parties are correctly named; the business being protected is described clearly; the restricted activities are tied to specific roles, customers, or products; and the duration and geographic scope are no broader than necessary. Make sure the agreement explains what legitimate interests you are protecting and what consideration the worker receives in return; that it coordinates with any nondisclosure, non-solicitation, IP assignment, or severance terms; and that state-specific requirements (wage thresholds, bans, or notice rules) have been checked. Finally, ensure the signer has had a real opportunity to review the document, ask questions, and, for significant restrictions, consult an independent lawyer before signing.

FAQ: Common Questions About the Non-Compete Agreement

Q: What is a non compete agreement in an employment contract?
A: It is a clause or standalone document that limits where and how you can work after leaving a job — for example, by barring you from working for direct competitors or starting a similar business within a certain time, place, and industry. In most states, courts will only consider enforcing such a clause if it is reasonably narrow and tied to legitimate business interests like trade secrets or customer relationships, not simply to prevent normal competition.

Q: Are non compete agreements legal and enforceable in every state?
A: No. Some states broadly ban employment noncompetes, others restrict them by income level, industry, or duration, and a shrinking number still enforce them relatively freely under a reasonableness test. There is currently no nationwide ban: the FTC’s attempt to implement one has been blocked, and the agency has shifted back to case-by-case enforcement. To understand non compete agreement law where you live, you need to look at up-to-date state-by-state summaries or consult a local lawyer.

Q: How long can a non compete clause last before a court thinks it’s too much?
A: There is no universal maximum, but many states view six to 24 months as the outer range for employment, while business-sale covenants can sometimes run longer. The longer and broader the restriction, the more carefully a court will scrutinize it. If your clause looks indefinite or untethered to the lifespan of confidential information, you increase the risk that a judge will narrow or refuse to enforce it. It is generally safer to choose the shortest period that meaningfully protects your trade secrets and goodwill.

Q: How can I get out of a non compete agreement I already signed?
A: Options depend on your state’s law, the exact wording, and your leverage. Some workers negotiate a release or a non compete agreement buyout; physicians sometimes talk about a physician non compete buyout written into their contract. Others argue that the clause is unenforceable because it is overbroad, violates state statutes (for example, low-wage protections), or conflicts with public policy. Because “breaking a non compete agreement” can carry real risk, you should talk with an experienced employment lawyer before assuming the clause is void or simply ignoring it.

Q: Are non competes allowed for independent contractors and freelancers?
A: Many of the same concerns apply, and some statutes cover contractors as well as employees. A non compete clause for independent contractors that heavily restricts where and for whom they can work may undermine their contractor status and be scrutinized under both noncompete and misclassification rules. Narrower tools — confidentiality, IP ownership, and non-solicitation — are often more appropriate for genuine contractors, especially in states that are skeptical of broad restraints on worker mobility.

Q: What is the difference between a non compete, non solicitation, and non disparagement agreement?
A: A non compete focuses on where and in what roles someone can work; a non-solicitation agreement typically limits contacts with specific customers, vendors, or staff; and a non-disparagement agreement aims to prevent harmful public statements. Because courts and regulators now favor narrower restraints, many employers lean more heavily on non-solicitation and confidentiality provisions and reserve true noncompetes for a smaller set of high-risk situations.

Q: Do I still need legal advice if I use a detailed non compete agreement template?
A: A well-designed template can walk you through key decisions, flag common pitfalls, and generate language tailored to job level and state. But it cannot replace individualized advice on your specific facts, your state’s latest statutes and cases, or strategic questions like whether to enforce a particular clause. For high-stakes roles, business-sale deals, or cross-border situations, you should treat the template as a starting point and have a local attorney review, adjust, and explain the final draft.

Sources and References

Noncompetes

Covenants not to compete

Trade secrets

State Noncompete Law Tracker

Noncompete Rule materials

Workforce Mobility Act

UTSA text

Get Started Today

A carefully tailored non compete agreement can protect sensitive know-how and customer goodwill while respecting modern limits on worker mobility and competition policy. Used alongside trade-secret programs, NDAs, and non-solicitation covenants, it can help you manage departure risk without overreaching.

Download the free Non-Compete Agreement Template or customize one with our AI Generator, then have a local attorney review before you sign.

You Might Also Like:

• Credit Application Template: Trade References + Safe Use Guide

• Name Change Petition Template (Free Download + AI Generator)Name Change Petition Template (Free Download + AI Generator)