Let us assume that a startup, say Spotify, is hiring a senior level employee, say, for the role of a Chief Marketing Officer.
What if the CMO of the startup wants to quit and start providing freelance marketing services to other startups, including other music apps?
In the education space, coaching institutes may also insert non-compete clauses in their agreements with faculty and key employees.
Hotels do a similar arrangement with chefs. A 5-star hotel may restrict a chef from working in another 5-star hotel in the nearby region.
This is why non-compete clauses are written – but they must be extremely narrow. Today, we will learn about drafting and I will not go into the validity of the clause.
Let us see the clauses.
Version 1: Non-compete for the duration of the agreement
During the Term of this Agreement, the Consultant shall not start any new business which is identical or similar, or otherwise competes with the services provided by <Training Institute/Hotel/Startup>, or work with a Competing Business.
Please draft this clause on chat now.
Version 2: Non-compete applicable after contract expiry/ termination
During the Term of this Agreement and for a period of [6 months/ 12 months/ 2 years] after its termination or expiration, the Consultant shall not start any new business which is identical or similar, or otherwise competes with the services provided by <Training Institute>, or work with a Competing Business.
Go ahead and draft this.
Version 3: Extend or narrow down the scope by defining Competing Business accordingly.
In this, you write the above clause, and then you define what a competing business is.
Competing Business means any business engaged in providing CLAT services in India. [too wide] [Broad]
Competing Business means the following coaching classes – A, B and C. [Narrow]
Competing Business means any business engaged in providing CLAT coaching services in 5 km radius of Connaught Place, New Delhi. [Narrow]
Now, I am going to give you a couple of examples to ask you whether the clause is broad or narrow.
Competing business means any company operating in the fintech space. Is this broad or narrow?
Competing business means Flipkart, PhonePe and BharatPe.
How was it? What did you learn? Can you now draft non-compete clauses for different kinds of agreements?
What if an international client asks you to review a non-compete clause?
Would you like to learn how to do it?
Here are some projects around it that are already available on Upwork:
Here’s a project on Upwork around non-compete from a US client, and they’re paying USD 100 for it!
