The start of an employment relationship is, in some respects,
like the start of a romantic relationship. Seasoned executives
become giddy with the prospect of a new love, er,
recruit. "He/she is perfect! I want him/her to start
tomorrow!" they say to their employment lawyer. To which we
say (among other things): "Do you want the employment
agreement to have a restrictive covenant?"
"Weren't you listening? I said they are perfect! And
starting tomorrow! Why do we need that?"
In fact, you don't need a restrictive covenant for most
employees. In certain circumstances, however, you may be
particularly vulnerable. For instance, the employee may have or be
expected to develop special relationships of confidence and trust
with other key employees, customers or suppliers, making your
business vulnerable to the employee soliciting them after
termination of their employment. The employee may have, or develop,
special knowledge and relationships critical to your business, such
that the employee could easily compete after departure.
In these circumstances, you can negotiate restrictions on
soliciting other employees, customers or suppliers after
termination. Or you can negotiate the nuclear option, a blanket
prohibition against competition after termination.
Of course, if it is that easy, why not throw one of these nifty
clauses into every employment agreement? The reason is, the courts
are very reluctant to enforce restrictions on former employees'
ability to make a living, and other businesses from using their
skills. Courts will not enforce a restrictive covenant
against a departing employee unless you can show that the
restraints imposed are reasonable between the parties and in
reference to the public interest (for some relevant authority, see
In following posts, we will discuss the key factors and
practical realities of enforcement and suggest practical tips for
employers when negotiating such covenants.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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