A restrictive covenant agreement, also known as a non-compete agreement, is a legal contract between an employer and employee that limits the employee`s ability to work for a competitor or start a competing business within a certain period of time. These agreements are commonly used in industries where trade secrets, confidential information, and client relationships are significant.
The purpose of a restrictive covenant is to protect the employer`s intellectual property rights, goodwill, and investment in training and developing an employee. It provides a level of assurance to the employer that their confidential information will not be shared with a competitor or used against them.
The content of a restrictive covenant agreement will vary depending on the industry, specific job duties, and the employer`s requirements. However, there are a few common elements that should be included:
1. The duration of the agreement – the length of time the employee is restricted from working for a competitor or starting a competing business.
2. The geographic scope – the geographic area in which the employee is restricted from working for a competitor or starting a competing business.
3. The scope of activities – the scope of activities the employee is prohibited from engaging in with a competitor or a competing business.
4. Considerations – a promise of consideration, such as additional pay or benefits, in exchange for agreeing to the restrictive covenant.
It is important to note that restrictive covenants must be reasonable and protect legitimate business interests. Courts will typically enforce a restrictive covenant if it is reasonable in scope and duration and if the employer can demonstrate a legitimate business interest to protect.
However, if the restrictive covenant is deemed unreasonable, overly broad, or not necessary to protect the employer`s legitimate business interests, it may not be enforceable. Additionally, some states have specific laws that regulate the use of restrictive covenants and may limit their enforceability.
In summary, a restrictive covenant agreement is a legal contract between an employer and employee that limits the employee`s ability to work for a competitor or start a competing business. The agreement should include the duration of the agreement, the geographic scope, the scope of activities, and consideration. It is essential to ensure that restrictive covenants are reasonable and protect legitimate business interests to ensure enforceability.