What is a restrictive covenant agreement?

What is a restrictive covenant agreement?

A restrictive covenant is a clause in an employment contract or services agreement that works to prohibit an individual from (among other things) competing with his or her ex-employer for a certain period after he or she has left the business.

Do you need to know about restrictive covenants?

Restrictive covenants or non-compete clauses often feature in contracts of employment – and in settlement agreements too – but they can have a serious impact upon your future work options. What are restrictive covenants? Do I need advice on the impact of restrictive covenants on my future employment?

What to do if new employee breaches restrictive covenant?

Ignore a letter from a new employee’s employer alleging a breach of their restrictions. Speak to the employee immediately and make it clear that this is unacceptable behaviour and that they must stop. Confirm this in writing.

When to settle a restrictive covenant injunction case?

Restrictive covenant injunctions cases can settle at any time during the above process. The negotiations themselves take place throughout the process, in the background, and are normally concluded by signing a settlement agreement document.

Is the post termination clause the same as a restrictive covenant?

Restrictive covenants, post-termination restrictions and non-compete clauses are all the same thing. They often feature, under any one of these labels, in your contract of employment.

When do you need a restrictive covenant agreement?

Restrictive covenant agreements may also be integral to other business relationships, however. Partnership agreements often include non-compete clauses and non-solicitation terms as well as non-disclosure provisions. This is especially common with new owners or partners coming into an existing business.

What happens if a party breaches a restrictive covenant?

If a party breaches a restrictive covenant, the non-breaching party may recover the money damages it suffered because of the breach. In addition, it may also be able to an injunction or restraining order prohibiting future breaches. If the agreement allows for the recovery of attorneys fees, this may also be recoverable.

How is the cost of a non-compete restrictive covenant amortized?

For tax considerations, a non-compete restrictive covenant is considered a section 197 intangible. The cost of a non-compete agreement as part of buying a business must be amortized over 15 years. 1  2  The amortization period begins with the month the agreement was signed or the month the business began producing income, whichever is later.

Why are restrictive covenants common in limited access communities?

Restrictive covenants are common in condominium and limited-access community situations, where all properties are similar, and the condo association wants to keep the property values up.