Restrictive covenants are agreements often made between employers and employees/contractors, as a condition of employment. They are not uncommon and are designed to safeguard the business owner from scenarios which have the ability to compromise their interests. Two such agreements are the non-disclosure agreement and the non-solicitation agreement.
A non-disclosure agreement is, essentially, an agreement that ensures confidentiality, insofar as the business is concerned. Employers want to ensure that their employees/contractors don’t disclose sensitive information regarding trade secrets or other data that would give a competitor an unfair advantage.
A non-solicitation agreement is an agreement wherein an employee/contractor is prohibited from soliciting or approaching customers/clients as well as other employees of a present or past employer for competitive business purposes.
In theory, and on paper, these restrictive agreements are beneficial to employers. The million-dollar question is, however, are they enforceable? The answer is… YES! The two-million-dollar question is, is it worth it? The answer to that is… MAYBE!
These agreements are definitely enforceable, as a matter of law. The problem, however, it that once an agreement has been breached, the damage has been done. Should a business owner cut his/her losses and move on without enforcing the agreement? Or should he/she spend time and resources litigating the breach of contract? That is a determination that has to be made by individual business owners.
In this day and age, employees don’t work for one employer for 30 years and then retire, as in years past. The reality is that employees, now, frequently move from employer to employer; and take their experience and skills with them. There is never a guarantee that an employee won’t breach a contract. That, in and of itself, should not deter small business owners in their endeavor to safeguard what they have worked so hard for.
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Sarah E. Holmes is a Philadelphia business attorney and strategist that helps start ups and established businesses looking to expand, protect their assets and increase their profits in an approachable, down-to-earth way.