Restrictive covenants in employment agreements can be very useful to companies on the leading edge of technology and business innovation. This document is a general checklist of factors employers should consider with respect to the use of such covenants.
Delaware Employee Restrictive Covenants
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How to fill out Employee Restrictive Covenants?
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FAQ
Under Delaware law, restrictive covenants generally are enforceable unless overly broad in the circumstances, and Delaware courts closely scrutinize them.
Courts will enforce restrictive covenants in certain cases. The scope of the restrictions must not be wider than the employer needs to protect its legitimate business interests. The usual business interests which an employer may protect include: Confidential information and trade secrets.
Under Delaware law, a restrictive covenant, such as a non-compete, generally is enforceable if it: (1) meets general contract law requirements; (2) is reasonable in scope and duration; (3) advances a legitimate economic interest of the party enforcing the covenant; and (4) survives a balance of the equities.
Apart from the "covenant hostile state" issue discussed above, the majority of jurisdictions within the US (either by statute or case law) will enforce restrictive covenants to the extent they are "reasonable" under the circumstances.
The most common types of post-employment restrictive covenants include non-competition clauses and restrictions prohibiting the solicitation of customers/ clients and employees, each of which are in effect both during the employment relationship and for defined period thereafter (e.g. six months).
If the clause is too restrictive then it is likely to be struck out as unenforceable by the courts. For example, if a covenant seeks to restrict your dealing with ?all clients? (known as a ?non-dealing clause) this may well be too wide and therefore unenforceable.
Restrictive covenants may contain 4 different types of promises: (1) a promise not to compete with one's former employer; (2) a promise not to solicit or accept business from customers of the former employer; (3) a promise not to recruit or hire away employees of the former employer; and (4) the promise not to use or ...
Typical restrictive covenants include: Non-compete provisions, prohibiting the employee from working for a competitor or in a competitive role at another employer for a specified period of time.
