Restrictive Covenants

A restrictive covenant is a contract clause that prohibits a party from doing something. The most common restrictive covenants in employment contracts is the non-compete clause that restricts, employees with special knowledge, training, or special ties to the customer base from:

  • working for a competitor or in the same industry;
  • starting a competing business; or
  • soliciting your employer’s clients or customers for a period of time after the contract ends or is terminated.

The aim of these clauses is to keep the former employee from using sensitive information (trade secrets, client lists and information, business methods) to aid in competing with the former employer. Before you sign a contract that contains a non-compete clause, consult an experienced trial lawyer. If you’ve already signed such a contract, the restrictive covenant may or may not be enforceable by your former employer, or it may be partially enforceable, depending on the terms of the clause and the facts of your subsequent employment. However, a non-compete clause may not lawfully prohibit you from working at all.

How do I know what a non-compete clause looks like?

A non-compete clause will generally be titled as one in the contract you are presented with. In general, a non-compete clause will restrict your ability to work after the end or termination of a contract, such as:

  • restricting you from working in the same industry;
  • restricting you from working from specific competitors;
  • restricting you from soliciting the employer’s clients;
  • using information you developed or gained in your job for another employer;
  • starting a competing business in the same or similar line of work.

I have a restrictive covenant problem:

  • If you have been presented with a contract containing a restrictive covenant, do not sign it.
  • If you already have a contract that contains a restrictive covenant and don’t know whether it is enforceable for the situation you are contemplating (e.g., you want to start your own business or go to work for another employer), you can be liable—don’t assume the covenant is unenforceable.
  • Consult an experienced employment lawyer.

Changes may occur in this area of law. The information provided is brought to you as a public service with the help and assistance of volunteer legal editors, and is intended to help you better understand the law in general. It is not intended to be legal advice regarding your particular problem or to substitute for the advice of a lawyer.

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