Restrictive Covenants

Restrictive covenants is the umbrella term for the package of post-employment restrictions in employment agreements and PIIAs. The package typically includes non-compete (where enforceable), non-solicitation (customers and employees), confidentiality, IP assignment, return of company property, non-disparagement, and sometimes additional provisions. Used together to protect the company's interests beyond the duration of the employment relationship, the specific package and its enforceability vary by jurisdiction, role, and consideration provided. Restrictive covenants is shorthand for "all the post-employment restrictions" in employment law.

The standard package:

Non-compete: restricts working for competitors for defined period. Variable enforceability.

Customer non-solicitation: restricts soliciting former employer's customers. Generally enforceable.

Employee non-solicitation: restricts recruiting former employer's employees. Generally enforceable.

Confidentiality / Non-disclosure: restricts disclosing confidential information. Universal.

IP assignment: transfers IP to company. Universal.

Return of property: requires return of company property at separation. Universal.

Non-disparagement: restricts negative public statements about former employer. Common.

Trade secret protection: specific protections for trade secret information. Universal.

Why "restrictive covenants" as umbrella term:

Convenient categorization: discussions about "the restrictive covenants" cover the whole package.

Common drafting pattern: employment agreements have a "Restrictive Covenants" section containing all of the above.

Litigation framework: courts often analyze restrictive covenants collectively rather than each provision in isolation.

Enforceability by component:

Most enforceable (across jurisdictions):

• Confidentiality / non-disclosure.
• IP assignment.
• Return of property.

Variably enforceable (jurisdiction-dependent):

• Non-compete (unenforceable in California; varying elsewhere).
• Non-disparagement (sometimes constrained by labor law protections).

Generally enforceable:

• Non-solicitation of customers and employees (with reasonable scope).
• Trade secret protection.

Consideration requirements:

At hiring: employment itself is consideration; restrictive covenants typically enforceable when signed at hire.

Mid-employment: courts often require additional consideration (bonus, equity grant, promotion) for new or expanded restrictive covenants.

At departure: severance can be consideration for new restrictive covenants in separation agreements.

Ryan's Take

Restrictive covenants only protect you if they're enforceable where your people actually live, and that varies a lot by state. Start from your employment counsel's templates for each jurisdiction, not one national one. If you add a covenant mid-employment, give real consideration for it or it won't hold up. The pieces work as a set, so a missing or sloppy one weakens all of them.

What founders get wrong: Using generic restrictive covenant templates without jurisdiction-specific calibration, or adding new covenants mid-employment without consideration (making them potentially unenforceable). The right discipline: jurisdiction-specific templates, consideration for mid-employment additions, regular review with counsel.

Related: [Non-Compete Agreement] · [Non-Solicitation Agreement] · [IP Assignment] · [NDA] · [Employment Agreement]

FAQ

What are restrictive covenants? The umbrella term for the package of post-employment restrictions in employment agreements and PIIAs, typically including non-compete, non-solicitation, confidentiality, IP assignment, return of property, and sometimes non-disparagement and trade secret protection.

What's in the standard restrictive covenants package? Non-compete (variably enforceable), customer non-solicitation, employee non-solicitation, confidentiality/non-disclosure, IP assignment, return of company property, non-disparagement (common), and trade secret protection. All commonly bundled in employment agreements.

Are restrictive covenants enforceable? Varies by component and jurisdiction. Most enforceable: confidentiality, IP assignment, return of property. Variably enforceable: non-compete (unenforceable in California), non-disparagement. Generally enforceable with reasonable scope: non-solicitation, trade secret protection. Use jurisdiction-specific counsel.