What is a 'Non-Compete Agreement'
An agreement between two parties, typically an employee and employer, where the employee agrees not to use information learned during employment in subsequent business efforts for a set period of time. Employers usually insist on non-compete agreements because of the possibility of an employee, upon termination or resignation, working for a competitor or starting a business, and gaining competitive advantage by abusing confidential information about their former employer's trade secrets or sensitive information such as customer/client lists, business practices, upcoming products and marketing plans.
BREAKING DOWN 'Non-Compete Agreement'
In some states, non-compete agreements are extremely difficult to enforce. Some jurisdictions, such as the state of California, do not allow non-compete-clauses at all. A very popular example of a non-compete agreement dispute is the case of Kai-Fu Lee, a Google executive who used to work for Microsoft. In this case, Kai-Fu Lee left Microsoft and started working for Google within one year of a signed non compete agreement..