PREAMBLE & LEGAL FRAMEWORK
This Non-Compete Agreement ("Agreement") is entered into as of [Date] between [Company Name] ("Employer/Company") and [Employee/Contractor Name] ("Employee").
Legal Basis: BGB §90 (German Non-Compete), US Common Law Restrictive Covenants, State-specific doctrines (Blue Pencil, reasonableness).
ARTICLE 1: DEFINITION & PROHIBITED ACTIVITIES
1.1 Restricted Field of Activity. During the Restriction Period and Territorial Scope (defined below), Employee shall NOT:
(a) Direct Competition: Engage in any business, employment, or independent practice in the field of [Specific industry/service description], which includes: [Products/services: e.g., "SaaS customer data platforms", "Executive recruitment", "AI model training"];
(b) Ownership Interest: Own, acquire, or hold any equity interest (directly/indirectly through spouse, relatives, or trusts) in any entity engaged in Restricted Activity;
(c) Employment: Work as employee, contractor, advisor, or consultant for any Competitor (defined below);
(d) Customer Diversion: Solicit, service, or knowingly transact with any of Employer's customers/clients listed in Schedule A (Customer List attached) OR acquired during Employee's tenure.
1.2 Definition of "Competitor". A competitor is any entity that:
(a) Derives more than [20%] of revenue from services/products in the Restricted Field; OR
(b) Is engaged in direct competition with Employer in the Restricted Territory; OR
(c) Targets the same customer base as Employer during Employee's tenure.
1.3 Permitted Activities (Exceptions). Notwithstanding the above, Employee MAY:
(a) Work in the Restricted Field outside the Territorial Scope (per Section 2.2);
(b) Work for an entity in the Restricted Field that does not compete with Employer's specific service offerings (with Employer written approval);
(c) Engage in passive investment (< 5% ownership) in publicly traded companies in Restricted Field, provided Employee has no management role.
ARTICLE 2: TEMPORAL & TERRITORIAL SCOPE
2.1 Restriction Period (Post-Employment).
(a)
German Law (BGB §90 Enforceability): Non-compete is enforceable post-employment for maximum
24 months (GmbH/small-to-mid market); periods >24 months are void per
BGB §90(2).
(b)
This Agreement specifies: [X months] (maximum 24 months from Employee termination date)
(c)
Calculation: Runs from last day of employment, not from agreement date.
2.2 Territorial Scope.
☐
Global: Non-compete applies worldwide (typically for companies with international operations)
☐
Continental: European Union, UK, and EFTA states (EU-wide market presence)
☐
National: [Germany, France, USA (specify state)]
☐
Regional: [e.g., "within 100 km of Company headquarters at [Address]", "within Bundesländer of Bavaria, Baden-Württemberg"]
Reasonableness Test (US): Territorial scope must be reasonable to protect legitimate business interests (per
Restatement (Second) of Contracts §188); overly broad geographic limits may be unenforceable.
2.3 Legitimate Business Interests (Justification). This restriction protects Employer's:
(a)
Trade Secrets & Confidential Information: [Specific technical know-how, algorithms, business processes] (per
EU Trade Secrets Directive 2016/943);
(b)
Customer Relationships: Personal relationships with key clients listed in Schedule A, established during Employee tenure;
(c)
Competitive Advantage: Employer's investment in Employee training and market position.
ARTICLE 3: CONSIDERATION & ENFORCEABILITY
3.1 Consideration (Value Exchange). Employee's continued employment constitutes consideration for this non-compete (if signed during employment per BGB §311 - Formation of Contract).
(a) If signed upon hire: Employer benefits from loyalty commitment; consideration = employment offer itself
(b) If signed during employment: Additional consideration =
[bonus, promotion, continued employment, €X lump sum]
(c)
US States (e.g., California, Colorado): Overbroad non-competes may be unenforceable regardless of consideration (
California Business & Professions Code §16600 "void" doctrine).
3.2 Severability & Blue Pencil Doctrine (US). If any term of this Agreement is found unenforceable:
(a) Strict Interpretation (Most US States): Court will NOT modify terms; unenforceable clause is struck entirely (no "blue pencil");
(b) Equitable Reformation (Some States): Courts may reduce overly broad time/geographic limits to reasonable extent per equitable principles;
(c) German Law (BGB §90): Non-compete exceeding 24 months is void in toto; partial enforcement not possible.
3.3 Reformation Clause (Optional - US Only).
"If any court determines any provision of this Agreement unenforceable, Employer and Employee authorize the court, to the extent permitted by law, to modify the restriction to the maximum extent enforceable while achieving Employer's legitimate business interests."
ARTICLE 4: REMEDIES & ENFORCEMENT
4.1 Breach & Damages. If Employee violates this Agreement:
(a)
Liquidated Damages (Pre-agreed): [EUR X / USD X] per violation (must be reasonable estimate of anticipated harm, not punitive);
(b)
Actual Damages: Employer may pursue recovery of demonstrable harm (lost customer revenue, trade secret misuse) in addition to liquidated damages (if not exceeding actual harm);
(c)
Injunctive Relief: Employer entitled to seek immediate injunction (einstweilige Verfügung per
ZPO §940 or preliminary injunction per US civil procedure) prohibiting competitive activity, without posting bond if irreparable harm shown.
4.2 Whistleblower Exception (US). Notwithstanding this Agreement, Employee may:
(a) Disclose information to government agencies (SEC, OSHA, FBI) regarding potential legal violations per
18 USC §1833 (Defend Trade Secrets Act);
(b) Report concerns to Employer's legal/compliance dept or Board without fear of retaliation.
4.3 Remedies Are Cumulative. Employer may pursue multiple remedies (injunction + damages + liquidated damages) simultaneously; recovery of one remedy does not waive others.
CRITICAL ENFORCEABILITY ISSUES:
- German law: Restrictions exceeding 24 months are VOID
- California, Colorado, Oklahoma: ALL non-competes are per se unenforceable
- US other states: "Reasonableness" test (time + geography + scope) applied
- Consider non-solicitation/non-disclosure as alternatives if non-compete unenforceable
- Damages must be liquidated damages or actual harms, NOT penalties
ARTICLE 5: DEFINITIONS & CLARIFICATIONS
5.1 "Restricted Activity" Scope Examples.
(a) INCLUDE: [Direct sale of competing product, employment recruiting, customer consulting, joint ventures]
(b) EXCLUDE: [Academic research, open-source contributions (if not for competitive product), passive investments in public companies]
5.2 Customer Lists & Trade Secrets. Schedule A (Customer List) and Schedule B (Confidential Information) attached hereto are incorporated by reference and may be updated by Employer during Restriction Period upon written notice per EU Trade Secrets Directive Art. 1
5.3 Survival After Termination. This non-compete survives termination of employment regardless of cause (resignation, termination for cause/without cause, mutual separation) per BGB §626
ARTICLE 6: STATE-SPECIFIC ENFORCEABILITY (US ONLY)
6.1 Jurisdictional Analysis:
☐
VOID States (No Enforcement): California BPC §16600, Colorado (C.R.S. 8-2-113), Oklahoma (Okla. Stat. tit. 15, § 217) — Non-competes PER SE VOID/UNENFORCEABLE regardless of reasonableness
☐
Reasonable Test States: Most US states (NY, TX, FL, IL, etc.) enforce IF: (a)
☐ German Law Override (BGB §90): German jurisdiction = max 24-month restriction (>24 months = VOID)
6.2 Reformation Clause (Equitable Relief): "To the extent any provision hereof is found unenforceable, Employer and Employee authorize the court to reduce terms to maximum enforceable extent consistent with Employer's legitimate business interests per Restatement (Second) of Contracts §188."
ARTICLE 7: POST-EMPLOYMENT OBLIGATIONS & COMPENSATION
7.1 Garden Leave / Non-Compete Compensation (Optional): ☐ Company pays [50% of base salary] during first [6 months] of Restriction Period | ☐ No compensation (pure non-compete, enforceable if reasonable). Payment protects enforceability per Restatement Second of Contracts §188 (consideration requirement)
7.2 Cooperation with Transition: During Restriction Period, Employee shall cooperate with Company in: (a) Transition of projects to replacement staff, (b) Customer introductions (if requested, reasonable frequency), (c) Documentation of work/processes (not time-consuming)
ARTICLE 8: INJUNCTIVE RELIEF & ENFORCEMENT PROCEDURES
8.1 Irreparable Harm Presumption: Parties acknowledge breach causes irreparable harm not fully compensable by damages. Employer entitled to seek preliminary/temporary injunction (einstweilige Verfügung per ZPO §940 / TRO per US civil procedure) WITHOUT posting bond if:
(a) Likelihood of success on merits
(b) Irreparable harm if injunction not granted (confidential customer lists / trade secrets)
(c) Balance of hardships favors Employer
8.2 Enforcement Clause: If breach established, Employer entitled to: (a) Immediate injunction, (b) Liquidated damages per Section 4.1, (c) Actual damages (demonstrable lost revenue), (d) Attorney fees/costs (if parties agree)
ARTICLE 9: SCHEDULE ATTACHMENTS
Schedule A - Customer List: [Attached list of customers/clients for purposes of non-solicitation]. Subject to update by Employer upon written notice during Restriction Period.
Schedule B - Confidential Information: [List of trade secrets / proprietary info subject to protection]. Examples: algorithms, pricing strategies, technical specifications, strategic plans.
ARTICLE 10: GOVERNING LAW & DISPUTE RESOLUTION
10.1 Choice of Law.
☐ German law (
BGB §90-91) + German procedural law (ZPO) - if Company is German
☐
[State] Law (e.g., Delaware, New York, Texas) - if US company (specify which state best serves Employer interests given Blue Pencil doctrine)
10.2 Dispute Resolution.
(a)
German Court: Exclusive jurisdiction = Munich Regional Court (Landgericht München I) for preliminary injunctions; arbitration for main dispute
(b)
US State Court: [Delaware Court of Chancery / Specify]
(c)
Arbitration: DIS (German Arbitration Institute) or
AAA (American Arbitration Association) per applicable rules (confidential resolution preferred for trade secret disputes)
CRITICAL ENFORCEABILITY REMINDER: German law enforces max 24-month restrictions. California, Colorado, Oklahoma: all non-competes per se VOID. US other states: reasonableness test applies (duration, geography, scope must be reasonable to protect legitimate interests). Always draft with specific customer lists + trade secrets to strengthen enforceability. Overly broad restrictions will be struck entirely (no partial enforcement in most states).
SIGNATURE BLOCK
Date & Place: ________________________ ________________________
EMPLOYER: [Company Name]
By: ________________________ Signature
Name/Title: ________________________ Date: ________________________
EMPLOYEE: [Employee Name]
By: ________________________ Signature
Name/Title: ________________________ Date: ________________________
ACKNOWLEDGMENT BY EMPLOYEE: I acknowledge that I have received a copy of this Agreement, had opportunity to review with legal counsel, and understand all terms including restricted activities, territorial scope, time period, and potential remedies for breach.
LEGAL NOTICE: This non-compete is enforceable only to the extent permitted by applicable law. In some jurisdictions (e.g., California), non-competes may be unenforceable. Both parties should consult legal counsel regarding enforceability in their jurisdiction before signing. This document does not constitute legal advice.
SCHEDULE A: CUSTOMER LIST & CONFIDENTIAL INFORMATION
The following customers/key accounts are protected under this Agreement:
[List: Company Name, Contact, Relationship Value, Industry Sector]
This list may be updated by Employer with 30 days written notice.