The contract that a company executes with a new hire sets all the rules for the employment relationship. The vast majority of an employment contract’s terms typically focus on the time while the employee maintains a job at the company.
Terms regarding compensation, job performance and even the duration of the employment arrangements will comprise the majority of the contract. However, many employers include terms and their contracts that apply to the future when the employee no longer works for the company.
Restrictive covenants limit what a worker can do after leaving the business. The three restrictive covenants below are the ones most commonly included in modern employment contracts.
Arguably the best-known and most notorious of all restrictive covenants, the non-compete agreement effectively prevents an employee from going to work for a competitor or starting a competing business for a fixed amount of time after leaving their current employment.
Some states, including California, do not enforce non-compete agreements, and many others impose significant limitations on non-compete agreements. Even the federal government has discussed limiting their use in recent years.
Like non-compete agreements, non-disclosure agreements are relatively well-known. People often associate them with situations like sexual harassment settlements, but employers also use non-disclosure agreements to protect trade secrets from disclosure.
A non-disclosure agreement prevents an employee from sharing certain information with other individuals or publishing the information for public use.
The non-solicitation agreement is likely the restrictive covenant that the fewest people know. It binds an employee from attempting to take clients or possibly other employees away from the company. Those who would have access to client rosters or human resources databases would be among those who may have to sign non-solicitation agreements, as they could otherwise damage the company by coming after its workforce or customers.
As with any other part of an employment contract, restrictive covenants are often subject to negotiation during the hiring process. They are easy for workers to largely ignore until there are allegations of a violation, which might lead to a civil lawsuit. Learning more about the terms frequently included in employment contracts can benefit workers and businesses preparing for onboarding or navigating a contract dispute.