United States: Employment Restrictive Covenants And Other Post-Employment Restrictions


§ 80:1 Scope note

This chapter discusses the use and enforcement of restrictive covenants between employers and employees. The chapter first addresses the different types of covenants and their purposes of preventing the loss of goodwill, client relationships, and confidential information, and preventing unfair competition by a departed employee or a competitor.

We next turn to the factors that employers consider in deciding whether to litigate to enforce a restrictive covenant. These factors include stopping the imminent harm from the potential loss of other employees or clients, or use or disclosure of the employer's confidential information, as well as preserving the business's going value or "goodwill." Often, the loss of a key group of employees and/or clients may devastate a business, and preliminary injunctive relief is necessary to keep the business intact. In other instances, the loss of a few clients or single client may be so impactful to a business that the damages from that loss overshadows the harm from the potential loss of other, smaller client relationships. In those instances, an employer may seek to litigate to recover damages, based on an analysis of several key factors. Employers may also be forced to litigate (whether for injunctive relief or damages) to deter future instances of raiding their employees and clients and to make clear that they will protect these relationships even to the point of potentially expensive litigation.

Also provided is a discussion of the various claims, defenses, and remedies that typically emerge in litigation to enforce restrictive covenants. Attention is also given to the effect a liquidated damages provision in a restrictive covenant agreement has on the likely available remedies through litigation. In addition, we address the venue of the dispute and the use of alternative dispute resolution. The chapter also highlights some key substantive differences between New York law and that of other states, and discusses how choice-of-law issues are resolved.

We also outline some practical considerations and pre-litigation steps employers will need to take to prepare their case before filing. Cases often involve motions for preliminary injunction, which require significant showings by employers as to the imminent harm they seek to prevent. In order to meet its burdens, an employer must usually undertake a substantial investigation for evidence to support its claims. Once a request for injunctive relief is filed, the proceeding often turns into a mini-trial, as the evidence introduced at the preliminary injunction hearing will frequently make or break a case. This includes a discussion of issues concerning, and sources of, discovery, both before and after a case is commenced. Practical tips regarding electronic discovery, both pre-complaint and post-complaint, will be highlighted. The discussion will touch on issues concerning possible resolution after a case has been commenced or a preliminary injunction hearing has been held.

Finally, the chapter concludes by providing checklists and additional tips for restrictive covenant drafting and litigation, and provides some sample language for various covenants. Related topics are covered in Chapter 79, "Contracts for Services" (§§ 79:1 et seq.); Chapter 104, "Theft or Loss of Business Opportunities" (§§ 104:1 et seq.); or Chapter 105, "Misappropriation of Trade Secrets" (§§ 105:1 et seq.).

§ 80:2 Strategic objectives

The threshold question for the employer concerning whether to propose and whether and how to enforce restrictive covenants is: what does the employer seek to protect? Employers should consider what relationships in their business are most vulnerable when key employees leave. These include relationships with particular clients or customers, as well as relationships with particular employees, groups, or business units. Employers should also consider what steps will ensure that they can preserve and maintain these relationships even after key employees leave the company, such as seeking to prevent use of confidential information, seeking to prevent solicitation or servicing of existing or prospective clients, and seeking to prevent solicitation of other key employees to whom the employer would entrust the continued servicing of the clients. Once the potential harm is identified, employers can then assess what specific protections will allow them to minimize the impact of the employees' departures and maximize the likelihood of preserving key relationships.

The basic question for the employee at the time a covenant is proposed is usually more straightforward: is the employee willing to abide by certain post-employment restrictions as a condition of accepting a job with a new employer, or once employed, agree to restrictions in exchange for additional benefits, such as cash, stock options or other equity grants, greater responsibilities, promotion, or other things of value. Litigation often ensues when employees ignore their covenants or take a myopic view of their enforceability when a new, lucrative opportunity presents itself.

§ 80:3 Are restrictive covenants "restrictive" or "protective"?

Post-employment covenants are often referred to as "restrictive" covenants because they place restrictions on employees' post-departure activities. Some practitioners also use "non-competes" as shorthand, even though the restrictions may be more focused than broader restrictions on competition with an employer, such as prohibiting only solicitation or servicing of the employer's clients. Some practitioners describe these provisions as "protective" covenants. In litigations, attorneys may seek to use one name or the other depending on whom they represent. Counsel for employees may draw subtle attention to the restrictions on their clients posed by overly "restrictive" covenants, while counsel for employers may look to draw on the psychology of protections for their clients provided by negotiated "protective" covenants. For uniformity and clarity, this chapter refers to postemployment covenants under their more traditional and more common name of "restrictive" or noncompete covenants.

Setting aside the issue of nomenclature, attorneys for employees and employers will try to portray the goal of the covenants differently. Employees' counsel will cast the covenants as merely restrictive or punitive, as if designed to prevent an employee from earning a living or being unduly restricted by the mere fact that the employee sought to improve her employment situation by leaving (or being forced to leave) the employer, or designed merely to prevent competition that would benefit customers. In contrast, attorneys for employers seeking to enforce the covenants will argue that they exist to protect the relationships, goodwill, and confidential and proprietary information of the employer from an employee who seeks to solicit away a client she met while on the employer's payroll, misappropriate the employer's confidential information or destabilize the employer's work force by selectively soliciting away talented employees. In addition, an employer may seek to emphasize the significant value of the matters to which the covenants relate and that the employer built that value through years of hard work. In contrast, the employee will try to demonstrate that the value is insubstantial because, for example, the company and customer information are widely known.

§ 80:4 Preliminary considerations

The key questions that underlie litigation of restrictive covenants are the same from the point of view of the former employer or the employee:

  • Do the covenants at issue prevent unfair competition or are they merely anticompetitive?
  • Are there particular interests of the employer that are protectable, i.e., client relationships, relationships with employees, goodwill, confidential and proprietary information?
  • Are the covenants designed to protect such legitimate business interests and do the covenants work as designed?
  • Do the covenants allow the employee to work in a chosen eld without undue restraint?
  • Are the covenants reasonable in scope (in terms of duration, geography, or client relationships protected)?
  • Was there sufficient consideration provided for the covenants?
  • Do the covenants consider special factors, such as an employee's pre-existing relationships with the clients or whether information desired to be protected is publicly available?
  • Has the employer complied with its obligations under the agreement containing the covenants?
  • What were the circumstances of the termination?

In evaluating these considerations, it is critical that employers determine the precise activities that they want to restrict. Absent this initial thought process, employers may draft inarticulate, vague, ambiguous or overly broad restrictions. An employer that intends to enforce its post-employment agreements needs to have specified precisely the obligations imposed on the employee, or risk that it may be unable to enforce its restrictions.1

Counsel for both employers and employees should assess these preliminary questions in determining the likelihood that the covenants will be enforced.

To read this Chapter in full, please click here.


* Mr. Lasky and Mr. Klausner thank David J. Fisher, an associate at Davis & Gilbert LLP, who co-authored this chapter.

1. See Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp, LLC, 813 F. Supp. 2d 489, 507, 80 Fed. R. Serv. 3d 1025 (S.D. N.Y. 2011) (refusing to enforce a noncompetition agreement, in part, because the prohibited activities were vague, and thus the restrictions were deemed ambiguous and overly broad); Stork H & E Turbo Blading, Inc. v. Berry, 32 Misc. 3d 1208(A), 932 N.Y.S.2d 763, *2, fn. 2 (Sup 2011) (concluding that the employees had not violated an otherwise reasonable covenant because the employees' activities did not violate the prohibited post-employment conduct described in the covenant).

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Reinhart Boerner Van Deuren s.c.
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Reinhart Boerner Van Deuren s.c.
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions