Contracts help solidify agreements between professionals and businesses. Employers clarify what wages and benefits they intend to provide. They may also outline basic expectations for the employee within the contract.
Employment contracts may also include rules about personal conduct. The inclusion of restrictive covenants in employment contracts is a common practice. Employers try to limit the possibility of workers misusing their knowledge or relationships acquired while working for the business.
Restrictive covenants limit future activities and often impose penalties on those who violate the terms of restrictive covenants. The following are the three most common restrictive covenants that employers choose to add to contracts with workers.
Non-compete agreements
Non-compete agreements are perhaps the best-known restrictive covenants currently used by businesses. A non-compete agreement prohibits an employee from starting a competing business. They also cannot take a job with a direct competitor of their former employer. If the former employer discovers unfair competition, the company can potentially take legal action against the worker to pursue damages or force them to cease infringing activities.
Non-disclosure agreements
Also known as confidentiality agreements, non-disclosure agreements prevent workers from sharing information with outside parties. Non-disclosure agreements can protect private company information. Workers cannot share information about how the company operates online or with news outlets. They also cannot share that information with other businesses.
Non-solicitation agreements
Workers can do real harm to a company by leveraging the relationships that they develop while working for the business. Non-solicitation agreements may include provisions that prevent workers from trying to recruit former coworkers or subordinates for positions with a different company. Non-solicitation agreements can also prevent workers from directly communicating with company clients or customers. They may have to keep client rosters confidential.
Typically, restrictive covenants are only valid and enforceable when the worker receives something of valuable consideration when signing. Additionally, employers generally need to limit them to a specific geographic area or a set amount of time. Non-disclosure agreements are the exception, as they can sometimes mandate lifetime confidentiality.
Integrating the right terms into employment contracts and enforcing those terms can protect businesses from the harm that employees can cause. Exploring ways to strengthen employment contracts can help businesses protect their market share and trade secrets accordingly.