Definition and Types of Restrictive Covenants
The following restrictive covenants are recognised and may be enforceable under the law:
- Non-compete clauses;
- Non-solicitation of customers;
- Non-solicitation of employees.
Enforcement of Restrictive Covenants—process and remedies
Generally, courts hold that a covenant restricting the activities of an employee upon the termination of his or her employment with the employer will be enforced if it protects a legitimate business interest, is reasonably limited in scope, time and place, and is supported by consideration, and is reasonable; the reasonableness of the restrictive covenant is key to its enforceability. In other words, it should afford only a fair protection to the employer’s interest and not be so broad in its operation as to interfere with the interests of the public or prevent an employee from engaging in his or her livelihood.
Use and Limitations of Garden Leave
Garden leave is a period during which a departing employee provides notice to the employer and is given his or her salary for a set period of time, but is not permitted to work. The underlying rationale for garden leave is to prevent the employee from competing in some way with the employer or taking confidential information during this period of time. Like restrictive covenants more generally, there is no clear federal law regarding garden leave and each situation will be examined independently. Unlike in many countries, however, it should not be assumed that garden leave would be valid in the U.S. if it does not satisfy restrictive covenant requirements.