What is a non-compete clause?

A non-compete clause is an agreement between an employer and employee that prohibits the employee from working for a direct competitor for a specified period of time after employment is terminated. The clause also prohibits a former employee from starting a similar business that competes with the employer.

The premise behind the non-compete clause is that a former employee may use and share confidential information gained during employment that would give the new employer or business or an unfair advantage. Many courts will honor non-compete clauses but may alter the duration of the clause if it is deemed too long or inappropriate. A typical clause is in effect for six months to a year.