By: Martin M. Shenkman, CPA, MBA, JD

An agreement in which you commit not to compete with a business or employer is referred to as a non compete agreement. These arrangements are commonly included in employment agreements, shareholder agreements and other arrangements. For example, in exchange for an employer giving you employment, you may be asked to sign an employment agreement that includes a non compete provision. This might, for example, obligate you not to work in a business that is a similar line, within 20 miles of the location of your employer, for two years. The goal of such a provision should be to restrict your ability to take advantage of the contacts and knowledge gained during your employment and fairly protect your employer's business. For the arrangement to be enforceable it may be subjected to reasonableness and other standards. The law governing non compete agreements is extremely complex, and frequently evolving. The law on this also differs significantly from state to state. If the provision is too broad, some courts may cut it back to something reasonable and enforceable, in other circumstances it may be voided.

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