Forfeiture for Competition Clauses in ERISA Top-Hat Plans: How Can They Be Enforced?

Many executive-level benefits and compensation agreements (top-hat plans) contain provisions requiring forfeiture of benefits if the executive, upon retirement, competes with the former employer. These non-competition provisions are commonly called "forfeiture for competition" clauses.

But as many employers have found when disputes arise, enforcement of these provisions can be difficult. Differences in state law regarding the enforceability of non-competition clauses in the employment context, and a general trend toward interpreting restrictive covenants narrowly in favor of the former employee, can frustrate employer attempts to enforce forfeiture for competition clauses.