Drafting Restrictive Covenants in Employment Contracts

Restrictive covenants or non-compete clauses are commonly used in employment contracts to prevent unfair competition. Unfair competition normally takes the form of a former employee soliciting the employer’s customers or using confidential information after becoming employed with a competitor of his former employer. Courts and Legislatures have detailed a number of specific requirements that a restrictive covenant in an employment contract must satisfy to be enforceable. For example, an employer must have a ‘protectable interest.’ An employer can protect confidential information, but how do the courts distinguish the employer’s confidential information from that information which an employee can call his own?

Restrictive covenant must also be reasonably necessary for the employer’s protection. And, restrictive covenants must be reasonable as to time and territory, and not impose an undue hardship upon the employee or offend public policy. Finally, an employment contract normally has multiple restrictive covenants, and the divisibility of such clauses is examined. The purpose of this article is to explain the numerous factors involved in drafting an enforceable restrictive covenant in an employment contract.