How Employers Obtain Restrictive Covenants from Employees

When an employer wants to get additional protection against what former employees might do with knowledge and experienced gained while employed for that employer, the employer might attempt to get its employees to enter into restrictive covenants. An employer can accomplish this in a number of different ways.

The employer might require all or most employees to enter into employment agreements. The agreements might address many employment issues, such as pay, benefits, leave and discipline. Or, the agreements might be less comprehensive, dealing with only a few key issues. The restrictive covenant might well ended up being hidden among the other provisions, and some of the other provisions might be of a lot more interest to the employee than the restrictive covenant.

But burying the restrictive covenant can be a risky tactic. One risk is that the employee ignores the restrictive covenant, not so much because of a decision to ignore it, but because the employee may simply not be aware of it. The other risk is that a court may be less willing to enforce the covenant because the employee may be deemed to have not received adequate notice of the restriction. This risk increases significantly if the employer fails to provide the employee with a copy of the agreement, let alone failing to provide a copy of a fully executed (signed) agreement. The agreement might become next to unenforceable if the employer fails to maintain a signed original of the agreement.

Instead of using a comprehensive employment agreement, an employer might instead have the employee sign an agreement dealing exclusively, or almost exclusively, with post-employment restrictions. For the employer, the advantage of using an more specialized agreement is that there are fewer notice problems. But timing may count for a lot. The employer wants to avoid any suggestion of coercion.  That is, the employer does not want the circumstances to look as if the employee had no choice but to sign the restrictive agreement. If circumstances suggest coercion, a court would be less inclined to enforce the restrictive covenant.

Another method an employer might use to obtain a restrictive covenant from an employee is place the restrictive covenant in an employee manual or policy handbook. Notice to the employee again becomes an issue in using this method. The employer may want to provide a copy of the manual or handbook to the employee, and have the employee sign for it. However, doing this might not be enough to call the employee’s attention to the provision..

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