Restrictive Covenants Attorney in Omaha, Nebraska
Restrictive employment covenants, also known as non-compete clauses or restrictive covenants, are provisions in an employment contract that limit an individual's ability to compete with their employer after the end of their employment. These clauses are typically used to protect the employer's business interests, such as trade secrets or customer relationships.
Restrictive covenants typically fall into three main categories: non-competition clauses, non-solicitation clauses, and non-disclosure clauses. Non-competition clauses prevent the employee from working for a competitor or starting their own competing business for a certain period of time after their employment ends. Non-solicitation clauses prevent the employee from soliciting the employer's customers or employees for a certain period of time after their employment ends. Non-disclosure clauses prevent the employee from disclosing the employer's confidential information, such as trade secrets, to third parties.
Restrictive covenants are typically included in employment contracts at the beginning of the employment relationship, but they can also be added later on through a contract amendment or a separate agreement. However, in order for a restrictive covenant to be enforceable, it must be reasonable in scope, duration, and geographic reach. This means that the covenant must be narrowly tailored to protect the employer's legitimate business interests without unduly restricting the employee's ability to earn a living.
For example, a non-competition clause that prevents an employee from working in their field for two years after their employment ends may be considered unreasonable if the employee has specialized skills and there are only a few potential employers in their field. On the other hand, a non-competition clause that only prevents the employee from working for a direct competitor within a certain radius of the employer's location may be considered reasonable.
In general, courts are reluctant to enforce restrictive covenants because they can restrict an individual's ability to earn a living and may be used to unfairly limit competition. Therefore, courts will carefully scrutinize restrictive covenants to ensure that they are reasonable and do not violate public policy. If a restrictive covenant is found to be unreasonable or unenforceable, the employer will not be able to enforce it against the employee.
There are several factors that courts will consider when determining the reasonableness of a restrictive covenant. These include the duration of the restriction, the geographic scope of the restriction, the type of employment and the employee's role, the employer's legitimate business interests, and the potential impact on the employee's ability to earn a living.
For example, a court may consider a non-competition clause that prevents an employee from working for a direct competitor for two years after their employment ends to be unreasonable if the employee has specialized skills and there are only a few potential employers in their field. In this case, the court may decide to modify the covenant to make it more reasonable, such as by reducing the duration of the restriction or limiting the geographic scope.
In addition to being reasonable, restrictive covenants must also be supported by adequate consideration. This means that the employer must provide the employee with something of value in exchange for their agreement to the restrictive covenant. Typically, the consideration is the employment itself, but the employer may also offer additional compensation or benefits, such as a signing bonus or an increased salary.
If an employer includes a restrictive covenant in an employment contract without providing adequate consideration, the covenant may be considered void and unenforceable. This is because the employee has not received anything of value in exchange for their agreement to the restrictive covenant.
Despite the potential benefits of restrictive covenants for employers, there are also potential drawbacks. For example, restrictive covenants may make it difficult for employers to attract and retain top talent, as employees may be reluctant to Sign an agreement that limits their ability to move upward or out on their own. Additionally, it may create problems between employee/employer relations. If you have questions or concerns about the use of restrictive covenants give Joseph D Hall & Associates a call today!