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3 Kinds of Restrictive Covenants for Your Employment Contracts

Burgoyne Law Offices June 17, 2021

Your employment contract probably talks about what you expect your workers to do and how you will compensate them for fulfilling those obligations. You can also include terms that discuss what you don’t want your employees to do.

So-called restrictive covenants are clauses or separate agreements in contracts intended to limit the future actions of one of the parties. There are many different kinds of restrictive covenants, but there are three main options for those creating an employment contract.

Non-Compete Agreements

Non-compete agreements are probably the most well-known and contentious of all restrictive covenants. Some states won’t even enforce a non-compete agreement. A non-compete agreement essentially prevents an employee from taking a job with a competitor or starting a competing business after they leave a company.

Non-Disclosure Agreements

When a worker signs the non-disclosure agreement, they promise not to share protected information learned during their employment with outside parties. A non-disclosure agreement prevents someone from sharing trade secrets with competitors. It also prevents someone from going to the press with stories that could damage the company’s reputation.

Non-Solicitation Agreements

The people who work for your company will likely get to know your suppliers, clients and other staff members. Any of those could try to solicit your staff to work at a company they start or a new employer that hires them. Non-solicitation agreements prevent someone from undermining your business by soliciting those you employ or work with for their own gain.

Including restrictive covenants is only the first step. You also have to be ready to defend them, as they are frequent causes of contract disputes in court.