A non-compete agreement is a form of a contract signed between the employer and the employee, under which the employee agrees that she/he will not compete with the employer in the market during or after the employment period. These agreements are made to prevent the employee from entering into the competition with the employer as in such scenarios the internal information of the employer is also at risk.

An employee may use the same information, or trade secrets of the employer and enter the market to gain more profit, therefore to stop this from happening the non-compete clause is used in the employment agreement. At times, the employee have access to the goodwill of the company, by way of clients or investors, therefore, it has to be made sure, that after the employment period is over, or even during the employment period, the employee does not use such resources for the benefit of its own.

A non-compete agreement should be framed in such a manner that it is fair to both parties. Usually, a non-compete agreement is in effect only for a certain period of time, after the employment period if the employee is over, or even in cases where an employee is terminated by the company. The main purpose is to prevent the leak of sensitive information of the employer company.

A non-compete clause is usually considered to be legally binding when it has a reasonable limitation period. The employee should not be completely restricted for an unreasonable period. Another point to note is that such agreements are also restrictive in terms of geographical area. Therefore it is important that such a clause is framed in a manner that is not discriminatory to the employee’s career in the future.

There are certain points that need to be mentioned with clarity in the Non-compete clause:

1. Duration restricts the employee from entering into the market setup, or even joining a competitor. However such duration should be reasonable.
2. The scope that is the area of restriction should be specified. An employer should not restrict an employee from entering into all sorts of business setup, but should only restrict the area under which the employee was working as the part of the employer company.
3. Geographical set up is a major point. As also, mentioned above, the area where the employee may not conduct the business should be specified. However, it is to be kept in mind that the geographical area restricted should be mostly the local area or the market area where the employer company works.
4. Compensation needs to be clearly stated. When an employer restricts the employee by putting such restrictions, it is important to note that this may also affect the financial status of the employee, therefore the employer should provide a reasonable amount of compensation to the employee during that restriction period.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.