Non-compete agreements (NCA) represent a separate agreement. They could be in an employment contract, or as a separate article in a buy and sell agreement. Sometimes they are referred to as “Covenants not to complete. “
This is based on the possibility that an employee can do harm to a company upon termination. They could know sensitive information about the company’s operation, owners and employee’s personal information, special operations, and proprietary information to a competing advantage, along with so much more.
Picture a very long-term employee working side by side with the owners, for many years, and then leaving to work for the owner’s competitor. Certainly, there can be issues.
No compete agreements (NCA), can be used to retain employees also. It would be very difficult to change jobs within an industry or profession when the leaving employee is limited to compete in a geographic and specific industry for a period of time. However, non-compete agreements are hard to enforce, because in many instances the agreement has overreached and is very broad in the definition of industry and geographic coverage.