• An Initial Guide to Post-Employment Restrictive Covenants
  • June 21, 2017 | Authors: James R. Hays; Jonathan Sokolowski
  • Law Firm: Sheppard, Mullin, Richter & Hampton LLP - New York Office
  • On Monday morning, at 9:00 AM, you receive the following email from your Chief Executive Officer: “Our Senior Vice President of Sales just tendered his resignation without notice. To make matters worse, I received a notification from LinkedIn a few minutes ago that he is assuming the same position for a direct competitor. What do we do now?” Rather than an SVP of Sales, perhaps it’s the Chief Technology Officer, the Head of Product Development, or an employee with a unique skillset that the company cultivated at a significant expense. In each case, however, the employee’s defection to a direct competitor represents a significant risk to the company’s competitive advantage that you have a limited ability to address absent the presence of an agreement between the parties restraining the employee from competition. Enter the restrictive covenant – a widely used contractual clause in the U.S. which restricts a terminating employee from engaging in various competitive activities for a defined, post-employment period. This article will briefly address an employer’s need for restrictive covenants, followed by a discussion of the various types of covenants that companies employ to protect their business interests, including how (and to what extent) those covenants may be enforced.