Restrictive Covenants and Non-Compete Agreements

While restrictive covenants take many forms, the most commonly used are non-compete agreements and non-solicitation agreements. These agreements restrict employees from working for competitors or soliciting clients or employees after their employment has concluded. While such agreements were once limited to senior executives, employers are increasingly asking all manner of employees to enter into restrictive covenants as a condition of their employment.

What’s the Purpose of Non-Compete and Non-Solicit Agreements?

Designed to protect an employer’s interests, non-compete, and non-solicitation agreements can restrict an individual’s future ability to work in their chosen field for extended periods of time. They also can restrict an individual’s right to approach clients with whom they have worked for many years regardless of their prior relationship with that client. While such agreements may be appropriate when limited to an employer’s legitimate business interests, have reasonable limitations, and other appropriate safeguards for both parties, many restrictive covenant agreements are not crafted in this fashion.

Non-compete and non-solicit agreements are often constructed in the broadest possible terms with an eye towards protecting the employer’s interests. Restrictive covenants can and often do arise at many different points in the employment relationship, whether as part of a new employment relationship, in advance of a promotional opportunity, as part of a deferred compensation scheme, or as part of the terms of a separation agreement. It is important to seek appropriate guidance from experienced legal counsel when issues involving restrictive covenants arise, be that prior to entering into such an agreement, upon seeking or securing a new employment or business opportunity, upon receipt of a “cease and desist” letter threatening litigation or upon the commencement of litigation over a restrictive covenant seeking damages or an injunction.