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An Unrestricted Look At Restrictive Covenants
Author: Scarinci Hollenbeck, LLC
Date: May 13, 2015
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A restrictive covenant generally refers to the portion of an agreement that legally binds someone to either take, or abstain from taking, certain actions. If these obligations are broken, penalties or legal action could follow.
As mentioned above, there are consequences for breaking a restrictive covenant. But what exactly is the special obligation included in these contracts?
Basically, it’s a promise made by someone, but for our purposes, the agreement is often made between one employer and an employee.
For example, a non-compete clause can be an example of a restrictive covenant. In this case, let’s say that someone works for a particular major film studio. He or she signed a contract with the company and within that agreement lies an explicit promise that the individual will not move to a rival studio within six months of leaving his or her current job. This promise is considered a restrictive covenant.
A non-compete clause as a restrictive covenant can prove useful in maintaining secrecy around sensitive information employees could take to competitors should they find a new job.
There are a number of other restrictive covenants out there. For example, there are non-solicitation covenants, which prevent the pilfering of clients, customers or suppliers of the employer by a former employee. Additionally, there are non-dealing clauses, which prevent the former employee from engaging with his or her old clients, customers or suppliers.
Often times, these agreements are written in a narrow, concise manner to make them easily justifiable and difficult to challenge in court. When a restrictive clause is challenged, it will often require outside help. If you find yourself trying to put together your own restrictive covenant, or trying to navigate a particularly difficult one included in one of your signed contracts, don’t hesitate to contact an attorney for assistance.
- Industries: Entertainment & Media
- Practices: Corporate Transactions & Business
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
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