A non-competition agreement is a type of restrictive covenant
setting out the rights and obligations of an employee post
departure from the company. Usually, these restrictive covenants
attempt to prohibit an employee from competing with an employer
following departure from the company, regardless of the cause for
departure.
Non-competition agreements usually relate to the individual
goodwill held by employee based on their relationship with
customers and employees, operational knowledge and certain other
factors that influence the value of the business.
Estimating the value of a non-competition agreement is typically
done by notionally determining the value of the business without a
non-competition agreement. The result is then compared with the
value otherwise determined in a notional market context or the
price paid in an open market transaction, known as the with and
without approach.
