Restrictive Covenants
ri-STRIK-tiv KUV-ə-nənts
Restrictive covenants are contractual promises that prevent someone from doing certain business activities, typically for a set period after employment ends or shares are sold.
Restrictive covenants are contractual promises that prevent someone from doing certain business activities, typically for a set period after employment ends or shares are sold.
Restrictive covenants typically limit four main activities: working for competitors (non-compete), poaching employees (non-solicitation of staff), stealing clients (non-solicitation of customers), and sharing confidential information (non-disclosure).
The restrictions are time-limited and geographically bound to be legally enforceable.
Companies use restrictive covenants to protect their legitimate business interests, particularly trade secrets, client relationships, and workforce stability.
They're especially common in industries where intellectual property, client relationships, or specialised knowledge give companies their competitive edge.
Most restrictive covenants run between 3 to 12 months after employment ends, though some can extend to 24 months for senior executives.
Courts generally won't enforce restrictions that last longer than reasonably necessary to protect the company's interests.
No - courts will only enforce restrictive covenants that are reasonable in scope, duration, and geographic area.
If a covenant is overly broad (like banning you from working in your entire industry worldwide for five years), a court may strike it down entirely or reduce it to reasonable terms.
Breaking restrictive covenants can result in the company seeking an injunction to stop the activity immediately, claiming financial damages for losses incurred, or both.
The consequences depend on the severity of the breach and the actual harm caused to the business.
Yes, restrictive covenants are negotiable, especially before signing a contract.
You can discuss narrowing the scope, shortening the duration, limiting the geographic area, or requesting compensation during the restriction period to make the terms more balanced.
