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Restrictive Covenant
Restrictive Covenant

The definition of "restrictive covenant".

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Written by goHeather
Updated over a week ago

A restrictive covenant in a contract is what the common law refers to as a restraint of trade. Restrictive covenants are frequently found in employment contracts.

A restrictive covenant, known as a non-competition clause, for example, precludes the employee, upon leaving employment, from competing with the former employer.

Another kind of restrictive covenant is a non-solicitation clause, which precludes the employee from taking the employer's customers or employees.

In some jurisdictions, certain restrictive covenants are illegal. However, in jurisdictions where certain restrictive covenants are legal, the restrictive covenant must still be reasonable both in specificity, time and distance to be enforceable.

Somewhat analogous to a restrictive covenant is an intellectual property clause, which can grant the employer all rights to any intellectual property (i.e. inventions) created by the employee and prohibits the employee from taking any of the employer's intellectual property. Likewise, a confidentiality clause prohibits an employee from divulging any trade secrets or customer leads belonging to the employer, for example.

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