Employment Agreement Restraint of Trade: What You Need to Know
When it comes to employment agreements, it is common for employers to include a restraint of trade clause. This clause limits an employee’s ability to compete with their former employer after leaving their job. While this may seem like a reasonable request from the employer, it is important for employees to understand their rights and the potential consequences of agreeing to such a clause.
What is a restraint of trade clause?
A restraint of trade clause is a contractual agreement that limits an employee’s ability to work in a similar role or industry for a certain period of time after leaving their current job. This clause can be included in an employment agreement, and it is intended to protect the employer’s business interests.
Why do employers include restraint of trade clauses?
For many employers, it is important to protect their business interests from former employees who could potentially take clients, trade secrets, or other confidential information to a new employer. Additionally, employers may want to prevent former employees from directly competing with their business in the same industry.
What are the potential consequences of agreeing to a restraint of trade clause?
One of the main consequences of agreeing to a restraint of trade clause is that it limits an employee’s ability to find work in their chosen field or industry. If a former employee is bound by such a clause, they may need to seek employment in a different industry or location, which can limit their career growth and earning potential.
Additionally, a restraint of trade clause can limit an employee’s ability to start their own business or work for a competitor in the future, which can further limit their career options and earning potential.
What are the legal implications of a restraint of trade clause?
Employers must ensure that their restraint of trade clause is reasonable and does not violate any employment laws or regulations. An unreasonable restraint of trade clause may be unenforceable and could result in legal action or penalties.
Employees should also seek legal advice before agreeing to a restraint of trade clause, as it is important to understand the potential consequences and legal implications of such an agreement.
In conclusion, a restraint of trade clause is a common inclusion in employment agreements, but it is important for employees to understand their rights and potential consequences before agreeing to such a clause. Seeking legal advice and ensuring the clause is reasonable and enforceable can help protect employees and their future career options.