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Can a restrictive covenant be too restrictive?

On Behalf of | Jun 4, 2021 | Employment Law

When developing any type of business contract an organization will take steps to protect itself. Whether it is the creation of strong vendor contracts or comprehensive employment agreements, the business will slant the terms of the contract in their favor. This is also true for restrictive covenants such as noncompete clauses or non-disclosure agreements. Depending on certain factors, however, these clauses could ultimately be found unenforceable.

How a restrictive covenant is drafted can make it challenging to defend in an arbitration or courtroom setting. For example:

  • Including intangible items: It is commonly understood that the restrictive covenant should focus on measurable items. A chemical formula, a process improvement or a food recipe could be included in the agreement, but vague notions regarding an employee’s general experience or subject matter expertise are often unenforceable.
  • Including overly strict time and geographic limits: Generally, the noncompete agreement will include limitations on when and where a former employee can seek a new position. This is done by imposing a time period and geographic range. The need to limit competition is one thing, but when the restrictive covenant prevents an individual from seeking gainful employment, however, the contract might not be enforceable.
  • Including ambiguous language: The restrictive covenant must be drafted using clear, concise language. If the employer attempts to use ambiguous language or vague terms to protect their own position, the clause might be found invalid.

Employers will understandably seek to protect their business. Common ways to do this include drafting noncompete and non-disclosure agreements. Unfortunately, these restrictive covenants can be drafted in a manner that could make the agreement unenforceable. It is not uncommon for certain terms to be found invalid making them difficult to enforce in court.