Non-Compete Agreement
Definition
A contractual clause that restricts you from working for competitors or starting a competing business for a specified period (usually 1-2 years) after leaving the company. Non-competes are increasingly unenforceable in many states (California bans them entirely) but remain common in other jurisdictions. They can affect your equity if violation triggers clawback provisions.
Real-World Example
Your employment agreement includes a 1-year non-compete covering "any company providing similar products or services." You leave and join a competitor. Your former employer threatens to invoke the clawback provision on your vested equity, which is tied to the non-compete clause.
Common Mistake
Signing a non-compete without understanding how it interacts with your equity. Even if the non-compete itself may be unenforceable, the equity clawback provision tied to it may be enforceable. You could lose vested equity for joining a competitor even if the non-compete cannot prevent you from working there.
Why It Matters
Non-competes increasingly intersect with equity compensation. Understanding whether your equity has clawback provisions tied to competition restrictions is critical for career planning.
Related Terms
Want to learn one equity concept per week?
Read the Newsletter