Restrictive Covenants for Employment Agreements Template

In plain language: States the specific benefit the employee receives in exchange for agreeing to the restrictions — a job offer, promotion, bonus, or salary increase — establishing the legal foundation for enforceability.

Common mistake: Omitting any consideration recital, particularly when restrictions are added after the employee has already started work. Without fresh consideration, courts in common-law jurisdictions routinely void the entire document.

In plain language: Precisely defines key terms used throughout — 'Confidential Information,' 'Competing Business,' 'Customer,' 'Restricted Territory,' and 'Restricted Period' — so there is no ambiguity about what the covenants actually cover.

Common mistake: Defining 'Competing Business' so broadly that it covers any company in the employee's general industry — courts treat overreach as evidence the employer is protecting market position rather than legitimate business interests, and void the clause.

In plain language: Prohibits the employee from working for a competing business or establishing a competing enterprise within a defined geography for a defined period after leaving — the most heavily scrutinized clause in any restrictive covenant.

Common mistake: Setting the same non-compete duration and geography for every role regardless of seniority. A 24-month national non-compete for a junior sales rep is routinely struck down; calibrating scope to the employee's actual competitive knowledge dramatically improves enforceability.

In plain language: Prevents the departing employee from approaching or accepting business from the employer's customers or prospects they personally dealt with during employment.

Common mistake: Drafting the clause to cover all customers of the company rather than only those the employee personally worked with. An enterprise-wide customer ban is almost always considered broader than necessary and is difficult to enforce.

In plain language: Prevents a departing employee from recruiting or inducing colleagues to leave the company for a competing or new venture for a defined period.

Common mistake: Extending the employee non-solicitation to anyone at the company regardless of whether the departing employee ever worked with them. Courts have limited overly wide clauses to employees the departing person actually managed or closely collaborated with.

In plain language: Requires the employee to keep the employer's non-public business information strictly confidential during and indefinitely after employment, and to return or destroy all confidential material on departure.

Common mistake: Failing to require return or destruction of confidential materials on departure. Without an explicit obligation, a former employee may retain copies of customer databases or source code and claim they simply forgot to return them.

In plain language: Transfers ownership of all work product, inventions, software, designs, and improvements created by the employee in connection with the company's business — including work done remotely or on personal devices — to the employer.

Common mistake: Limiting IP assignment to work created on company equipment or during business hours. Remote and hybrid employees regularly create IP on personal devices; without location and time-neutral language, ownership is contested.

In plain language: Allows the employer to place the employee on paid leave during their notice period — keeping them off the market and away from clients and colleagues while salary continues to accrue.

Common mistake: Including garden leave language without reducing any post-termination non-compete period by the garden leave served. Courts in many jurisdictions count garden leave against the total restriction period — failing to address this creates ambiguity and potential overreach.

In plain language: A statement signed by the employee confirming that they have read, understood, and consider the restrictions reasonable — used as evidence against a later claim that the covenants are unenforceable.

Common mistake: Including the acknowledgment as boilerplate without actually giving the employee time and opportunity to review the document before signing. A court will look past a pro forma acknowledgment if the circumstances show the employee was pressured into signing on their first day without time to read it.

In plain language: Specifies which jurisdiction's law governs the agreement, and provides that if any individual clause is found unenforceable, the rest of the document remains in full force.

Common mistake: Choosing a governing law based on where the employer is incorporated rather than where the employee actually works. Many jurisdictions apply local employment law regardless of what the contract states — an employee working in California is protected by California law even if the contract specifies New York.

Restrictive covenants are contractual obligations in an employment agreement that limit what an employee can do during or after their employment. They typically include non-compete clauses, non-solicitation of customers and employees, confidentiality obligations, and IP assignment. Courts enforce them only when they protect a genuine business interest and are reasonable in scope, geography, and duration.

Enforceability depends entirely on the jurisdiction and how the clause is drafted. In most US states, courts enforce non-competes that are reasonable in scope and duration and protect a legitimate business interest. California, Minnesota, North Dakota, and Oklahoma effectively ban post-employment non-competes. In the UK, Canada, and the EU, restrictions are enforceable if reasonable but courts will not rewrite grossly overbroad clauses. Confidentiality and non-solicitation clauses are generally easier to enforce than non-competes across all jurisdictions.

A non-compete prevents the employee from working for a competing business or starting one within a defined geography and time. A non-solicitation clause is narrower — it prevents the employee from approaching specific customers, prospects, or colleagues they worked with, but does not stop them from joining a competitor. Non-solicitation clauses are more consistently enforced because their scope is easier to define and their impact on the employee's ability to earn a living is less severe.

In common-law jurisdictions — the US, Canada, UK, and Australia — restrictive covenants require consideration to be binding. For a new hire, the job offer itself is sufficient consideration. For an existing employee, you must provide something new and distinct — a bonus, salary increase, additional leave, or accelerated vesting. Courts have voided post-start-date covenants where the only consideration offered was "continued employment."

Yes, but you must provide fresh consideration — a new benefit the employee was not already entitled to — at the time of signing. Simply presenting updated terms to an employee who is already working, without an additional benefit, is generally insufficient in common-law countries. Document the consideration explicitly in the agreement and obtain a separate signature.

In jurisdictions that permit them, courts most consistently enforce non-competes of 6–12 months for most employees and up to 24 months for senior executives or key technical staff with broad access to trade secrets. Restrictions beyond 24 months are rarely enforced in any jurisdiction. The duration should be proportionate to the time it would take the employer to protect the threatened business interest — recruiting a replacement, re-securing client relationships, or updating compromised trade secrets.

Garden leave is a notice period during which the employee is paid their full salary but required to stay away from the workplace. It serves a similar protective function to a non-compete — keeping the employee off the market while clients and information age. In the UK, courts often reduce the post-termination non-compete period by the length of garden leave served, on the basis that the employer has already had the protection it needs. Employment contracts should address this offset explicitly.

The same types of restrictions — confidentiality, non-solicitation, IP assignment — can be included in an independent contractor agreement, but the analysis differs. Contractors are typically subject to less stringent restrictions because they are not employees, and over-restricting a contractor can contribute to worker misclassification risk. Non-competes for contractors are enforceable in fewer jurisdictions and must be narrowly tailored to the specific engagement.

The outcome depends on the jurisdiction and whether the agreement has a severability clause. In jurisdictions that practice blue-pencilling, a court may narrow an overbroad restriction — reducing the geographic scope or duration — and enforce the modified version. In others, the entire clause is struck. Without a severability clause, an unenforceable non-compete could potentially bring down adjacent clauses like non-solicitation in the same document. Including severability language is essential to protect surviving provisions.

Yes, for any employee with meaningful access to trade secrets, key client relationships, or proprietary technology. The enforceability of restrictive covenants is highly jurisdiction-specific and fact-dependent, and an over-engineered clause often provides less protection than a well-calibrated one. A 1–2 hour review by an employment lawyer typically costs $300–$600 and is worthwhile for senior hires, technical founders, or sales leaders with direct access to your most valuable accounts.