Protecting Your Business with Effective Post-Employment Restraints

Relevant For:

Business owners and HR professionals using employment restraints.

Key Points:

• Implement post-employment restraints to protect business interests.
• Restraint clauses must be reasonable in activities, duration, and geographic scope.
• Tailor restraint clauses to the employee's role and potential impact.
• Obtain legal advice to define the scope and enhance enforceability.
• Consider the nature of your business’s goodwill when drafting restraints.
• Use cascading restraint clauses for better court approval chances.
• Avoid overly restrictive clauses to ensure enforceability.
• Regularly review restraint clauses during salary reviews.

Full Article:

As a business owner, you understand the significant value your employees bring to your company — and the potential damage they can cause upon departure. Historically, post-employment restraints were reserved for executives, but today, businesses are implementing these clauses across all employment levels to safeguard their interests. However, determining an appropriate restraint and whether a one-size-fits-all approach exists can be challenging.

A post-employment restraint is a contractual term activated after an employee’s departure, restricting them from using confidential information or contacts to compete against their former employer. While courts avoid limiting an individual’s ability to earn a livelihood unnecessarily, they uphold reasonable restraints to protect an employer’s legitimate business interests. The onus is on the employer to prove the reasonableness of these restraints.

To assess the reasonableness, courts consider