What are Non-Compete, Non-Disclosure and Non-Solicitation Agreements?

What is a Non-Compete Agreement, and how does it differ from a Non-Disclosure Agreement (aka Confidentiality Agreement) and Non-Solicitation Agreement? All three are contracts, and all three are attempts by a business to protect its competitive edge. Each can be written as a separate agreement, or as clauses within another agreement, such as an Employment Agreement.

Persons asked to sign these agreements should not take them lightly because they can have huge impact on the consenting party, and are generally enforceable in most states. Laws regarding these agreements vary from state to state.

Non-Competition Agreements – aka “Non-Compete Agreements” — restrict someone from engaging in a specific line of work for a particular amount of time within a specific geographic area. They are used in two situations: (1) When an employer wants some assurance that his or her employee won’t take what the employee has learned from the employer to later compete against the employer; and (2) when the buyer of a business wants some assurance that the seller won’t start a new business in direct competition with the business just sold to the buyer by the seller.

Non-Solicitation Agreements enable Party A to restrict Party B from soliciting employees, customers or clients from Party A. As with Non-Compete Agreements, Non-Solicitation Agreements are also commonly used in the employment context and are for a limited amount of time. They also are used when the employer hires an outside vendor or independent contractor for a project in which individuals are given access to a party’s employees, clients or customers.

Non-Disclosure Agreements (aka Confidentiality Agreements) do not have time restrictions.Confidentiality Agreements are aimed at preventing employees from taking the confidential information of their employer, thereby harming the employer’s competitive advantage in the marketplace. Non-Disclosure Agreements are aimed at preventing a would-be buyer or merger partner from taking any confidential information — that is provided as the deal is being contemplated — that could be used to later harm the selling business. Confidential information might include trade secrets, customer or client lists, business and marketing plans, strategic plan and financial information.

Non-Competition Agreements are typically the broadest, and may encompass non-solicitation and non-disclosure provisions. Thus, employers prefer Non-Competition Agreements whereas employees prefer a more narrowly crafted Non-Solicitation or Non-Disclosure Agreement.

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Bonnie Wittenburg, Wittenburg Law Office, PLLC, 601 Carlson Parkway, Suite 1050, Minnetonka, MN 55305 952-649-9771 bonnie@bwittenburglaw.com www.bwittenburglaw.com