September 28, 2020 Articles

Restrictive Covenants: One Size Does Not Fit All

An analysis of how employee non-compete enforceability tests are ill-suited to govern the enforceability of non-solicitation and nondisclosure agreements.

By Ryan M. Billings

Restrictive covenant law largely developed in the context of non-compete contracts, where an employee was prohibited from working within X miles of a company’s location for Y years after termination. Courts were generally hostile toward such agreements, as they flatly barred departing employees from working in their chosen profession in the location where they worked and therefore likely lived (at least at the time the common law on this issue developed). More recently, these kinds of “classic” non-compete contracts have become less common, replaced by

  1. non-solicitation covenants, prohibiting a departing employee from soliciting a company’s customers, vendors, or other employees; and
  2. nondisclosure agreements, barring a terminated employee from disclosing a company’s confidential information and trade secrets.
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