By: Thomas M. Hogan
In analyzing restrictive covenants in an era of high employee
mobility, it is sometimes difficult to rationalize the need for
these agreements. This sentiment is reinforced by the notion that
restrictive covenants can be contrary to capitalist principles of
free market competition, resulting in numerous courts endorsing
invalidation. At the same time, there still exists an employer’s
countervailing interest to prohibit former employees from
exploiting their information or processes.
The interests of the three parties create the predictable
conflict in restrictive covenant enforcement. There are many
sources that provide drafting tips for employers but limited
information is available for employees. Restrictive covenants have
become very common in the employment context, but do employees
really understand the ramifications of what they are signing, and
furthermore, do they have the option of negotiating the terms of
these agreements? The purpose of this note is to bring some
understanding as to which types of restrictive covenants can be
enforced. Clarification of this area of the law is needed as many
employers unfairly present these agreements at the commencement of
employment with little or no guidance.
This note asserts employment lawyers should insist that their
clients only use restrictive covenants in the narrowest of
cases—when the covenants are tailored to the most unique of
employees—in an effort to limit the amount of litigation in this
area. Too often employers abuse restrictive covenants to deter all
levels of employees from pursuing opportunities with competitors.
In a time of job insecurity, and in a country that prides itself on
the entrepreneurial spirit, it is unfair to limit employees from
pursuing their employment goals, unless the restriction is
protecting a bona fide, legitimate interest.