What are Restrictive Covenants in Employment Law?

Employment Law | June 23, 2022

When it comes to employment contracts, there are many elements that employees fail to consider before signing and agreeing to the terms of employment. That is why it is necessary for employees to fully understand the terms of their employment, especially if any restrictive covenants are involved. Before signing an employment agreement, it is crucial to understand what restrictive covenants in employment law are and how they may impact your capabilities after leaving the job. That is why the employment lawyers at Linley Welwood have compiled some information on the most common restrictive covenants to help you understand the terms of your employment contract.

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3 Common Types of Restrictive Covenants in Employment Law

In employment law, the following three types of restrictive covenants are among the most common:

1. Non-Compete Clauses

A non-compete clause limits an employee from working for a competitor or starting their own business to directly compete against their former employer. Most non-compete clauses restrict employees from competing against the company for a period of 1 to 2 years after the date of their termination or resignation, though some only restrict employees from working for competitors within a certain range of the company’s location. For example, if an employer restricts an employee from working for a competitor within 50 km of their business, the employee could start a job with a competitor outside of this range.  Since non-compete clauses restrict an individual’s ability to work, they can be extremely difficult to enforce.

2. Non-Solicitation Clauses

A non-solicitation clause is used to prevent an employee from soliciting or trying to acquire clients of their former employer. This clause can also be used to prevent an employee from soliciting other employees to leave their current job for a role with another company. These clauses tend to be most common for sales-related roles and agencies with a long list of regular clients. While non-solicitation clauses are easier to enforce than non-compete clauses, they must still be worded carefully by the employer.

3. Non-Disclosure Agreements

Commonly abbreviated as NDA, non-disclosure agreements restrict employees from sharing confidential data or information with third parties, competitors, and other groups outside of the business. NDAs are commonly used to protect intellectual property, customer information, and other vital property that could harm the business if it were to be shared with another party. While non-disclosure agreements must be carefully worded by the employer, they are typically the easiest to enforce. This is especially true for cases involving intellectual property.

To learn more about restrictive covenants and employment contracts or to discuss the details of your case, get in touch with the team at Linley Welwood. We can be reached through our online contact form and will be happy to answer any questions you may have.

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