Termination & CIC

Non-Compete Period

The length of time an executive is restricted from working for a competitor after departure.

A non-compete period is the length of time after an executive’s departure during which the employment agreement restricts them from working for a competing business. It is stated in the agreement and summarized in the proxy’s description of executive termination arrangements, and it is usually limited to defined competing activities and a defined geography. Whether the restriction can actually be enforced depends on state law, which differs sharply from one state to another.

A non-compete period is the length of time after an executive’s departure during which the employment agreement restricts them from working for a competing business. The period is stated in the agreement and summarized in the proxy’s description of executive termination and severance arrangements. It typically runs from the date of termination, and the restriction is usually confined to a defined competitive business and a defined geographic area rather than to an entire industry.

A non-compete is ordinarily supported by consideration, which for an executive is commonly the severance itself or continued payment across the restricted period. That link matters in practice: where a company conditions severance on compliance with the non-compete, a breach can cut off payments the executive would otherwise receive, and the agreement generally says so expressly.

A non-compete period is usually paired with a non-solicitation covenant covering employees and customers, and often with a confidentiality covenant as well. The three are legally distinct, and a court can enforce one while declining another in the same agreement. A confidentiality obligation often survives indefinitely, while a non-compete or non-solicit runs for a stated term.

Enforceability is governed by state law, and the states differ sharply. Some enforce reasonable restrictions of limited duration and scope, while others restrict or void non-compete provisions for employees generally. That is why a company headquartered in one state may not be able to rely on an identical clause for an executive working in another, and why a choice-of-law clause in the agreement does not always settle the question.

Where non-competes are enforceable, courts generally test duration, geographic scope, and the range of restricted activity together, weighing the employer’s legitimate interest in protecting confidential information and customer relationships against the executive’s ability to earn a living. A long period covering a broad set of activities is more likely to be trimmed or refused than a shorter one tied to the business the executive actually ran.

The disclosed length says something on its own, independent of whether the clause would be enforced. A company that binds a departing chief executive for longer than is typical among its peers is signaling how much competitive risk it assigns to that person’s knowledge and relationships, which is a governance fact a reader can weigh alongside the period itself.

Executive non-competes sit inside a wider debate about non-competes generally, since several states have narrowed their use and regulators have questioned them as a matter of policy. For a reader of a proxy, the practical point is that a disclosed period describes a contractual term the company negotiated; its real force depends on the law that would apply if the restriction were ever tested.

The restricted period and the severance period do not have to match. An agreement may pay severance as a lump sum while the non-compete runs longer, or pay severance across the same span as the restriction, which turns the severance into compensation for not competing. Which structure applies is a disclosed detail rather than something to infer from the length of either period alone.

How it works

The agreement states a period
The length is measured from the date of termination, and the clause defines which competing activities and which geography it covers.
Consideration is identified
Severance, salary continuation across the restricted period, or another benefit supports the restriction, and the agreement identifies which.
Companion covenants are read alongside
A non-solicit and a confidentiality covenant are separate obligations that can carry different terms and different durations.
State law is applied
Whether the restriction can be enforced depends on the law that governs the dispute, which is not always the state named in the agreement.
Reasonableness is assessed
Duration, geography, and the scope of restricted activity are weighed against the employer’s interest in protecting confidential information and relationships.
Breach consequences attach
Where severance is conditioned on compliance, a breach can stop payments or require repayment, as the agreement provides.

In practice

The restriction periods a departure clause runs for.

Non-compete period How long the executive is barred from competing after departure.	36 months
Non-solicit period How long the executive is barred from soliciting.	36 months
Officer The executive whose terms these are.	Chief Operating Officer

A Wintrust employment agreement discloses a non-compete period of 36 months following departure.

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Where it appears

The narrative description of employment and severance arrangements in the proxy: A summary of the restrictive covenants for named executive officers, including the length of the non-compete and any accompanying non-solicit.
The "Potential Payments Upon Termination or Change in Control" section of the Compensation Discussion and Analysis: Whether severance is conditioned on compliance with the restrictive covenants, and what happens to the payments if the executive breaches them.
Exhibits filed with the annual report or proxy statement: The agreement text, where the definition of a competing business, the geographic reach, and any carve-outs can be read in full.
A standard form of restrictive covenant agreement filed as an exhibit, where the company uses one: The terms applied to a group of executives rather than negotiated individually, which shows the company’s default position.

Non-Compete vs. Non-Solicit

Two restrictive covenants that are frequently paired but restrict different conduct.

	Non-compete	Non-solicit
What it restricts	Working for a competing business	Soliciting the company’s employees or customers
Typical duration	A stated period after departure	A stated period, often similar in length
Effect on the executive	Narrows where they can work	Narrows who they can approach, but not where they work
Enforceability	Varies widely by state, and some states void it for employees generally	Enforceable in more jurisdictions than a non-compete
Consideration	Commonly the severance or payments across the period	Usually the same consideration as the accompanying non-compete
Interaction with severance	A breach can stop or claw back severance where the agreement provides	The same mechanism, stated in its own provision

Common misreadings

That a disclosed non-compete period is automatically enforceable: enforceability turns on state law and on the scope of the restriction, whatever the agreement says.
That the restricted period and the severance period are the same thing: one governs conduct after departure and the other governs payment, and they are set separately.
That a non-compete bars an executive from the whole industry: it reaches only the competing activities and geography the agreement defines.

Frequently asked

What is a non-compete period?

It is the length of time after departure during which an executive’s agreement restricts them from working for a competing business. The agreement states the period, the activities it covers, and the geography, and the proxy summarizes those terms for the named executive officers.

Are non-compete periods enforceable?

It varies by state. Some states enforce restrictions that are reasonable in duration and scope, while others restrict or void non-compete provisions for employees generally. Enforceability also depends on the specific activities and geography covered, so an identical clause can be upheld in one place and refused in another.

How long does a non-compete period usually last?

It varies by company and by executive, and the length is stated in the agreement rather than set by any rule. Longer periods are more common for senior executives than for other employees, and a longer disclosed period signals that the company places more competitive risk on that role.

Is an executive paid during a non-compete period?

It varies by company. Some agreements condition severance on complying with the restriction, some continue salary across the restricted period, and some pay severance separately from a non-compete that runs longer. The proxy states which structure applies for each named executive officer.

Is a non-compete the same as a non-solicit?

No. A non-compete limits where an executive may work, while a non-solicit limits who they may approach, such as former colleagues or customers. They are separate covenants with separate terms, and one can be enforceable even where the other is not.

Related terms