Restrictive Covenants

Another downside to employment contracts is “restrictive covenants.” These are parts of the employment contract that do not allow you to do certain things while you are working for your employer, and even after your job is over, sometimes for years. The general purpose of this part of the agreement is to keep you from using business information like trade secrets, client lists and information, or business methods that would help you compete against your employer or ex-employer.

One common restrictive covenant is the non-compete clause. A non-compete clause says that after you leave your job, you cannot work for a competitor or even in the same industry, or start a competing business for some period of time. Other examples of restrictive covenants are non-solicitation clauses and non-disparagement clauses. Under a non-solicitation clause, you generally cannot reach out to your ex-employer’s customers or employees to try to do business with them or hire them. Under a non-disparagement clause, you cannot say bad things about your ex-employer’s company, products, services, management or employees.

Restrictive covenants are usually valid and legal, especially if you have some special knowledge, training or skills. However, a non-compete clause may prevent you from working at all, so it usually can only be for a reasonable amount of time and only within a reasonable distance from your ex-employer’s location. If you already have signed or are being asked to sign a restrictive covenant, it is a good idea to have the language reviewed by a lawyer to understand your legal obligations and rights. If you violate a valid and legal restrictive covenant, your employer or ex-employer can sue you.

Legal Editor: Daniel S. Braverman, January 2015 (updated June 2020)