Non-Competition and Non-Solicitation
Employers often include what are called “restrictive covenants” within their employment contracts, i.e. Non-Competition and Non-Solicitation clauses, with a view of protecting their business after the employment relationship comes to an end. Such covenants prevent former employees from taking certain actions which may harm the employer’s business.
Of course, this must be balanced with the employee’s need to make a living.
Therefore, while restrictive covenants can be a useful tool for employers, the covenants’ effectiveness largely depends on the language used, as well as their scope.
Examples of Restrictive Covenants in the Employment Context
The most common restrictive covenants found in employment contracts are the non-competition, non-solicitation, and non-disclosure/confidentiality clauses.
A non-competition clause typically seeks to prevent a former employee from entering into or setting up a competing business in a specific geographical area. For example, it might not be so easy for an employee working at Chairs, Chairs, Chairs! to leave and work for Chairs and More Chairs down the street.
Generally, under non-solicitation clauses, a former employee is not permitted to induce their former employer’s clients, customers, employees, or vendors to work with them.
Confidentiality clauses prohibit employees and former employees from disclosing confidential information in relation to the business.
Is Your Restrictive Covenant Enforceable?
When determining the enforceability of a restrictive clause, courts will assess several factors, including whether the employer has a legitimate business interest in need of protection, whether the scope, duration, and geographic restriction are reasonable, the necessity of the clause, and whether the language used is clear.
For example, courts have generally been wary to uphold non-competition clauses that are excessive or unclear in its restrictions, prevent the employee from using their skills, are contrary to the public interest, or are merely a means to secure the employer’s competitive position. In fact, where the legitimate business interest of a non-competition clause is already covered by a non-solicitation clause, the non-competition clause might be deemed unnecessary altogether.
Employers should ensure any restrictive clause they want to rely on is drafted clearly, is reasonable, not overly broad, and is properly severable. A poorly drafted restrictive clause risks being unenforceable altogether.
While employees may believe their restrictive clauses are properly drafted, what is considered reasonable or clear varies depending on the industry of the employee. Other considerations which might render restrictive clauses unenforceable is the manner the employee was dismissed.
Contact Us
Whether you are an employer who needs employment contracts drafted, updated, or reviewed to ensure your business interests are being protected or an employee who wants their employment contract reviewed or wants to challenge their restrictive covenants, our team of lawyers would be happy to help you navigate your matter. Contact us at (800)771-7882, or email [email protected] and we would be happy to assist.
