Restrictive Employment Agreements

In the business and professional community in Nashville many employers are asking incoming employees to sign restrictive agreements or covenants. Employees and job seekers should understand these agreements are potentially barriers to future employment.

Restrictive contracts generally seek to limit information an employee can divulge to outside sources. The agreements may also attempt to bar the type of work a former employee can perform for a period of time or prevent the former employee from working for certain employers. In some cases there may be geographic restrictions on where someone can provide their services for a period of time.

Employers typically establish these provisions to protect themselves from competition by ex-employees. They want to stop trade secrets from reaching their competitors and to stop former employees from competing with them.

Employers usually request a prospective employee sign a covenant as they are being hired. It may be part of an employment contract that states what the employee will receive in compensation. In some situations an employee may be asked to sign a contract after taking a position. It can be requested even years after being employed by a company. In the latter case, an employee may be given the choice of signing or leaving the organization.

If the agreement is violated, there are penalties that can be imposed on the employee. This can include having to leave a future job with another employer or paying a penalty.

So, what should you do when confronted with this potential future barrier?

Read carefully what the contract states. Do you understand what it is saying? Can you accept the provisions? If you are unsure, get legal advice.

Is it in effect if you are fired or laid off? Or, is it in effect if you leave on your own? If it is the former, saying no thank-you may be the best option. You have the right to make a living.

If you are uncomfortable with the stipulations, see if you can have them removed or at least modified. Sometimes employers may not force the issue. You may be more important to them than the agreement.

One modification may be to have a shorter period of time restricting your employment opportunities. Another may be to cutback on the geographic region where you may not be able to render your services. Still another may be to reduce the limit on the types of employers you can work for.

If your job with the company changes, can the agreement be nullified? Be careful that you don’t end up with another more restrictive contract.

Rather than face having to go to court, see if you can have it agreed to that a future dispute would go to arbitration. This should prove less traumatic, quicker and less expensive than court.

Consider if the job is a good career move and you can live with the restrictions. If you don’t plan to stay with the employer long, maybe it isn’t worth the aggravation.

How bad do you want the job? Do the benefits outweigh the negatives? Can you find another similar position without restrictions?

If you are ever confronted with a restrictive covenant, make sure you take it seriously. You make think this is the last employer you will every work for, but in all likelihood it is not. Most people today have many employers in their lifetime.

A restriction on your employment options may prove more problematic than you ever imagined. Being involved in a contract dispute and not working for an extended period of time could be expensive and very stressful. A quick decision could cost you big-time.

It is important to understand that not all agreements are enforceable. Courts have defined some restrictions as not permitting an employee from making a living and are thus not legal. The U.S. Constitution gives every citizen the right to make a living. However, going to court against a former employer is expensive, time consuming and often mentally exhausting.