What is the definition of a Restrictive Covenant?

Restrictive Covenant is a term placed into your contract of employment to prevent you from taking certain action.  They are put into employment contracts to protect the employer and not the employee?

Restrictive covenant can have dramatic affect on your ability to obtain employment after you leave your current role.  Therefore it is essential that you realize how serious restrictive covenants are before you sign a contract of employment. If a covenant is reasonable and necessary to protect the business interests of your employer then they can be enforceable.  However, if your employer attempts to make covenant broad by making for long period of time or covering large area. This may prevent it from being enforceable. Another factor to take into account when considering whether restrictive covenant is enforceable is position of employment of the employee. For instance, managing director or chairman of company will have more severe restrictive covenants.

Protection from your employer:

A restrictive covenant and compromise agreements is an agreement that is aimed at protecting the interests of the employer. It includes protection of confidential information and trade secrets especially after an employee departs from an employment. In general, restrictive covenants are draft to block any employee from transferring to competition. BY using sensitive information against the employer, and soliciting or poaching customers and clients. An employee may sign such covenant as part of his pre-employment contract. It added provision in a compromise agreement upon his resignation or employment termination. Employers prefer to use restrictive covenants to continuously protect the company’s confidential information and trade secrets. The idea is that employees have the potential to use any important information against the employer especially. Employees decide to transfer to a competing business after termination of employment. These covenants are also use by companies against poaching of executives and employees by competitors.

Signed agreement by employer:

Any business likes to maintain trade connections to its self and that could possible by making employees sign restrictive covenants. When employee is ask to sign an agreement with employer, any existing restrictive covenant between employee and employer still applies. That means that even if there is no specific provision or statement about restrictive covenant in the compromise agreement. It is assume that the employee agrees that he/she would continuously honor such agreement. For instance, such covenant usually prevents any employee from working in any of employer’s competitors for at least six months. After termination of employment and possible signing of compromise agreement, employee is still oblige to honor the employment restrictive agreement. If you think restrictive covenant would not do well for you and would only lead to difficulty in finding. It gets alternative employment in future you have right to ask employer to release you from restrictive covenant.

Of course, the employer would hesitate to give in to your request. But you could always use the compromise agreement to do so. You could tell your employer that you would not sign compromise agreement unless you are release from employment restrictive covenant.

Leave a Reply

Your email address will not be published. Required fields are marked *