Employment Agreements and Restrictive Covenants
Many employment agreements contain restrictive covenants that limit your rights after employment. These are particularly common in high level executive employment agreements. They are also common in agreements with employees in sales and in technical or scientific fields.
It is important to understand the four major types of covenants that you may see in your agreement. Often there is not much time to consider, much less negotiate, the terms of your employment contract. But those terms can have a significant impact on your options when you leave the job, for whatever reason.
The four most common types of restrictive covenants are:
It is important to understand the four major types of covenants that you may see in your agreement. Often there is not much time to consider, much less negotiate, the terms of your employment contract. But those terms can have a significant impact on your options when you leave the job, for whatever reason.
The four most common types of restrictive covenants are:
Non Disclosure AgreementsMost employment agreements will contain some provision addressing trade secrets and confidential information. Typically the agreement will state that the employee will not use or disclose this information outside of the company. This restriction is often unlimited in time or geographical area.
You should know that even if you do not sign the agreement, you have a duty under the law not to disclose your employer's trade secrets. What the non disclosure agreement adds is protection for your employer's confidential information that may not meet the legal definition of a trade secret. Common examples include customer lists, pricing and marketing strategies, and certain methodologies or processes. Non disclosure provisions should not cause you alarm, but you should understand that they are almost universally enforceable. Non Compete AgreementsA non compete clause prohibits you from working for a competitor for a certain period of time after your employment ends. Whether this is enforceable depends on a variety of factors. For any agreements signed on or after October 1, 2018, there are specific limitations on enforcement created by a new statute in Massachusetts. For any non compete clause, the restriction must be reasonably necessary to protect a legitimate business interest of the employer.
If you are asked to sign an agreement that bars competition, you should review it with an attorney before signing. Intellectual Property and Work for Hire AgreementsYou may see a section in your agreement called "intellectual property," "assignment of inventions," or "work for hire." These are most common in jobs that require you to create things for your employer. That could be processes, products, or creative content.
This provision guarantees that the company owns the intellectual property in the work they pay you to do. These are common and generally enforceable. There are times, however, when you may want to consult an attorney before signing this provision. An example is if you have inventions or a body of creative work you created outside of your employment. Non Solicit AgreementsMany agreements contain provisions that restrict an employee from soliciting either the customers or employees of the employer. A provision barring solicitation of employees is usually intended to protect the employer's investment in personnel. It also protects against an employee taking an entire team into competition with the employer.
A provision barring solicitation of customers is a kind of limited non compete. This is because it restricts you from doing business with the customers you build relationships with while at the company. Non solicits are not, however, subject to the same scrutiny as a true non compete. If you only have a non solicit and not a non compete, you are free to work for a competitor as long as you do not solicit your former employer's customers. It is important to pay attention to the language of the non solicit. Some agreements simply say you shall not solicit. In that circumstance, you may still be free to accept business from a former customer if you do not approach them first. Others are written more broadly, and state that you shall not accept business from a former customer. You can read more about non solicit agreements in Massachusetts. |
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Enforcing Restrictive Covenants: Summary
Restrictive covenants in employment are fairly commonplace. Other than provisions that prevent an employee from competing altogether, you should expect that the business owner will be able to enforce them. Even non compete clauses are enforceable under certain circumstances. For this reason, if you are asked to sign an agreement with restrictions that last beyond your employment, you should consult with an employment attorney.
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We can help you review your employment agreement to make sure you are making an informed decision and protect your interests. You can use the button below to schedule a call back from a member of our team, give us a call at 781-784-2322, or fill out our web form to let us know a little more about your situation.
