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What is a restrictive covenant?

The relationship between an employee and employer is not always simple. It is not uncommon for employers to include a restrictive covenant within an employment contract. And it is crucial for an employee to have an understanding of the restrictive covenant not only during the time of employment, but especially after, as the contents and restrictions may carry on well after the employee leaves the company.

A restrictive covenant is done to protect an employer and the services and/or goods that the company offers. Restrictive covenants may include non-competition clauses or provisions which prohibit an ex-employee from working with the previous company's rivals or competitors. It may also prohibit the sharing of trade secrets, customers and documents with the ex-employee and a new employer.

Although the timeframes for restrictions may vary depending on the terms of the contract, generally non-solicitation and non-competition clauses are during the time of employment and a set time following the employment, but non-disclosure and confidentiality agreements are indefinite.

It is important that employees fully understand their employment contracts, as violations during the time of employment or after could lead to significant legal repercussions. It is also important for an employee on the verge of signing a new contract to study and understand the contents of the contract. During these times, it may be in an employee's best interest to get more information about employment law to get a better understanding of the contents of the contract before signing the agreement. Doing so can help prevent any employment disputes in the future.

Source: New York State Bar Association, "Restrictive Covenants: Limits and Enforcement," Sheryl B. Galler, Accessed Dec. 6, 2016

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