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When do companies add restrictive covenants to work contracts?

On Behalf of | Aug 18, 2021 | Business law |

Employment contracts formalize the relationship you have with a new worker. Contracts make plain in written language the obligations of that worker and the responsibilities your company will assume toward that employee. Employment contracts often outline compensation and discipline rules.

They may also include restrictions, such as rules against criminal convictions or certain kinds of social media activity while employed by a company. Some companies will also have workers sign special contracts with restrictive covenants included that extend beyond criminal activity or publicity matters. A restrictive covenant can limit the actions an employee can take even after they leave the company.

For example, non-compete agreements will prevent someone from working for a direct competitor or starting a business in the same industry. When does a business need to add restrictive covenants to its employment contract?

Restrictive covenants help those with innovative company practices

Companies expose themselves to risk by sharing certain information with their workers. Binding workers with a restrictive covenant can help prevent an executive or engineer from taking the information learned at your company and selling it to a competitor. These covenants can also stop someone from trying to hire your workers, approach your clients or duplicate your chemical process for a new employer or a company they start on their own.

Businesses that are successful because of their intellectual property or trade secrets may require restrictive covenants to protect their company’s success from the actions of former employees. Having workers sign contracts that include restrictive covenants when you hire them can protect your company from misconduct by those workers that could diminish the business’s competitive edge in the future.

Learning about contract and employment law can help maximize your company’s protection against unfair competition and damaging losses.