Restrictive covenants are a common feature in employment contracts, particularly for high-level executives, salespeople, or employees with access to valuable confidential information. These clauses limit an employee`s ability to compete with their employer after leaving the company or disclosing confidential information.
If you are an employer, it is important to understand the different types of restrictive covenants and how they function in employment contracts. Here are some examples of the most common types of restrictive covenants.
Non-competition clauses
A non-competition clause prohibits an employee from working for a competitor or starting a competing business for a specified period of time after they leave the company. These clauses are typically designed to prevent an employee from taking valuable knowledge or trade secrets to a competitor, and they may be enforced only to the extent necessary to protect the employer’s legitimate business interests.
Non-solicitation clauses
A non-solicitation clause prevents an employee from soliciting the employer’s customers or staff for a specified period of time after they leave the company. These clauses are designed to prevent an employee from poaching customers or staff from their former employer and can be enforced to the extent necessary to protect the employer’s legitimate business interests.
Confidentiality clauses
Confidentiality clauses prohibit employees from disclosing or using confidential information of the employer, including trade secrets, customer information, and business plans. These clauses are designed to protect the employer’s intellectual property and other sensitive information.
Garden leave clauses
A garden leave clause requires the employee to stay away from the workplace during the notice period of their resignation or termination. This clause is designed to prevent the employee from accessing confidential information or poaching clients or staff during this time.
Enforceability of restrictive covenants
The enforceability of restrictive covenants varies by jurisdiction and depends on the specific language and terms used in the contract. Courts will typically only enforce restrictive covenants to the extent necessary to protect the employer’s legitimate business interests, and the scope and duration of these clauses must be reasonable.
In conclusion, restrictive covenants are an essential tool for employers to protect their business interests, and there are different types of restrictive covenants that can be incorporated into employment contracts. Employers should ensure that their restrictive covenants are reasonable and enforceable, and seek legal advice when drafting or enforcing these clauses.
