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Restrictive language in employment agreements can often be confusing; non-competition clauses, restrictions on the use of confidential information, and non-solicitation clauses may seem quite similar. This article explains those various types of restrictive covenants. In general, the four types of restrictive covenants are:
- Restrictions on use of confidential information
- Anti-raiding of employees
- Non-solicitation of customers
- Non-compete agreements/provisions
For each type of restrictive covenant, an employer may be able to seek action against an employee if the covenant is breached. If an employee has a restriction in his/her employment agreement, the employer may be able to bring an action against the employee for breach of contract if he/she does not adhere to the restriction. Likewise, the employer may have a remedy against the employee under a state statutes (such as the Illinois Trade Secrets Act) or a common law claim for breach of fiduciary duty or misappropriation of trade secrets, even if the employee never signed an employment agreement. |
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| Restrictions on Use of Confidential Information |
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| For the employee, this is the least onerous of the four types of restrictive covenants. These restrictions prohibit a former employee from “using” or “misappropriating” confidential information which he/she learned or to which he/she had access while employed. |
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| Anti-raiding of employees |
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| These provisions prohibit former employees from inducing other employees to leave the former employer or to form a competing business. The duration of the restriction may vary, but must be “reasonable” in order to be enforceable. |
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| Non-Solicitation of Customers |
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| Non-solicitation provisions prohibit former employees from inducing customers to stop doing business with the employee’s former employer and/or from going into business with the former employee. Such provisions typically prohibit contact with and solicitation of customers with whom the employee has dealt within the last six months (or a similar period of time) of the employee’s employment. Like anti-raiding provisions, the duration of the restriction may vary, but must be “reasonable” in order to be enforceable. |
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| Non-Compete Agreements/Provisions |
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| Non-compete agreements or provisions are the most onerous of the restrictive covenants for employees, because they may diminish the ability of a former employee to earn a living. These provisions prohibit former employees from engaging in a “competing business” with the former employer. How broadly or narrowly the term “competing business” is defined is essential, but the term generally means that the employee may not work for a competitor for a certain period of time. In order to be enforceable, non-compete provisions must be reasonable in scope, duration, and geographic limitations. The more specialized the former employer’s business, the more extensive a non-compete provision can be under the law.
If you have questions regarding non-compete agreements or restrictive covenants, or if you would like an attorney to review your employment contract or other employment agreement, contact Caffarelli & Siegel Ltd. to speak to a Chicago Employment lawyer. |
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