The employment contracts that set out these limitations are known as restrictive covenants. We will be canvas these provisions in detail in a series of posts over the weeks ahead.
- Confidentiality agreements prohibit employees from disclosing the confidential information of the employer during and subsequent to employment, unless authorized. A typical confidentiality agreement will define the specific categories of information that are to be protected, require the employee's undertaking of non-disclosure of such information, and detail the specific, adverse legal consequences facing an employee who fails to maintain such confidentiality.
- Non-solicitation agreements typically prohibit a departing employee from directly or indirectly soliciting the employer's clients, prospective clients and employees for a specified time period following termination of employment.
- Non-competition agreements have a wider ambit than non-solicitation agreements - they purport to wholly restrict competition by the employee in related commercial endeavours. Such agreements typically prohibit former employees from working for direct competitors or from directly or indirectly competing with the employer's core businesses after termination. These agreements generally apply for a specified time frame, provide extended definitions of the prohibited businesses, and define the geographical regions within which such competition is prohibited.
For example, the employer must show that the restrictions set out are no more than is necessary to protect the legitimate business interest at stake. The departing employee’s freedom of contract must be not be unduly restricted and excessive restraint of trade is not permitted, particularly if no legitimate commercial interest of the employer is protected by an impugned covenant.
Thus, we'll close this introductory discussion by underlining that these agreements are serious legal documents that ought not to be taken lightly by employers or employees alike.