Running a company typically requires a lot of support. Business owners and executives often have to hire many people with the skills and educational training that they require. The right support can help a company grow more quickly and can reduce the stress on those in leadership roles.
Unfortunately, every new employee creates liability for the business. Employees could perform their jobs poorly or harass each other. They could also potentially leave their jobs and cause economic harm to the business after their exit. As such, many employers negotiating terms for employment contracts choose to protect themselves by adding restrictive covenants to these agreements.
Employees can harm a company after leaving
A restrictive covenant is essentially a clause or addendum to a contract that limits the future activity of an employee after they leave the organization. There are three main kinds of restrictive covenants, and each of them can detect businesses for certain types of worker activity.
Non-compete agreements prevent someone from starting a business in the same industry or accepting a job with a direct competitor immediately after leaving a position. Non-solicitation agreements can also prevent unethical competition. The worker who signed that agreement can’t attempt to hire their former co-workers or reach out to customers or clients to ask them to do business with their new company or their new employer.
Finally, non-disclosure agreements help organizations protect their trade secrets. These important contract inclusions can create consequences if someone shares information about a company’s trade secrets or business operations with others. Publishing information online, speaking with journalists or disclosing trade secrets to competitors could all constitute violations of a non-disclosure agreement.
Employers who discover that a former worker has violated a restrictive covenant could potentially take legal action against that employee. Enforcing a restrictive covenant could lead to the courts prohibiting certain types of economic activity or awarding the former employer compensation in the form of damages.
Businesses that include the right terms in employment contracts or even severance agreements can limit the damage that individual workers can the company cause after leaving their employment. As a result, updating and improving employment contracts can be a smart move for an organization looking to onboard new talent.