Non-compete clause in a settlement agreement

Before signing, clearly record whether the non-compete clause is waived, restricted or remains unchanged.

Do not allow the non-compete clause to continue by default

A non-compete clause may restrict you after employment ends when taking a new job or starting a business. Do not assume that the clause automatically ceases to apply because you enter into a settlement agreement.

Agree expressly what happens to the non-compete clause. Also record whether any non-solicitation clause, customer restriction and related penalty clause are waived or amended.

Important

A general full and final discharge does not always provide sufficient certainty. Address the non-compete clause and its waiver separately in the agreement.

Which terms should be agreed expressly?

Check not only whether the clause remains in force, but also which restrictions and penalties are attached to it.

Full waiver

The clearest solution is a written agreement that the employer will no longer derive any rights from the non-compete clause.

Limiting the clause

If a full waiver is not achievable, limit matters such as the duration, geographical area, roles or named competitors.

Business contacts and customers

Check separately whether a non-solicitation or customer clause remains in force. Describe as specifically as possible which business contacts, if any, remain protected.

Penalties and enforcement

Record whether contractual penalties are waived and that the employer will not enforce the waived or restricted clause beyond the agreed scope.

What if the employer will not waive the clause in full?

Negotiate a workable restriction instead. This may include permission to work for a specific new employer, excluding certain activities or shortening the duration.

Avoid wording that leaves room for dispute. The agreement should make clear what you may do after the termination date and under which conditions.

View the full negotiation guide

Review the clause in four steps

1Read every restrictive clause
Check the non-compete, non-solicitation, customer, confidentiality and penalty provisions.

2Define your plans
Identify which job, sector, region or customer base may be relevant after departure.

3Draft the exception
Record precisely what is waived and which limited restrictions, if any, remain.

4Check the final wording
Ensure that other provisions or schedules do not contradict the agreed terms.

Why a legal review is advisable

The validity and effect of a non-compete clause depend on its wording, the employment contract and the circumstances. An unclear exception may still lead to a dispute or a claim for contractual penalties later.

Before signing, have the agreed wording checked against your specific future plans.

Have your proposal reviewed

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