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Three types of restrictive covenants (and how to make them work)

On Behalf of | Jun 16, 2020 | Commercial Litigation |

Most companies rely on unique ideas to stand out from their competitors. Whether it’s a marketing tactic, an innovative product or even company practices, the essential details make your business different from the rest.

As the owner, you need to protect your company’s ideas from your competitors, or the business will suffer in the long run. But what are your options?

The right restrictions protect your secrets

One of the best tools an owner can use is a contract. You should try to draw up an agreement any time that a contractor, employee or vendor joins your company. Within that contract, you may want to include different types of restrictive covenants, such as:

  • Noncompete – This clause restricts employees from working with competitors for a set time limit and within specific geography of your business. For example, you could ask former employees not to work with competitors for at least six months and within 30 miles.
  • Nondisclosure – This restriction stops current or former employees from sharing secrets, data or vital information outside the company. It’s particularly useful if you are working with sensitive information that you want to keep out of competitors’ hands.
  • Nonsolicitation – It prohibits former employees from luring customers or other employees to their company. It’s helpful if you are concerned with competitors recruiting your employees away from your business.

All these can be used on their own or in conjunction with one another. It depends on your business and what you are willing to draw up in your agreements.

However, it’s critical to note that if an agreement is too broad or unreasonable, employees may fight back and cause problems for the future of your company.

If you want to make these work, it’s best to work with your company’s leaders and attorneys to define what reasonable expectations are and how to best approach protecting your secrets.