Post-Employment Covenants

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Post-Employment Covenants

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Is there importance that lies in post-employment covenants? Many business owners attempt to protect their business interests by asking employees to agree to post-employment restrictive covenants, including covenants not to compete, not to solicit customers, and not to solicit other employees. Usually these convents show up in an employee’s initial employment contract or as a separate contract signed at some point during the course of the employee’s tenure.

As with all contracts, a post-employment restrictive covenants must be supported by consideration. Think of consideration as “what each party gets in exchange for a promise to do (or not do) something.” In the case of every contract for a restrictive covenant, the employer gets the employee’s promise not to do something in the future. What the employee gets in exchange for his or her promise depends largely on the point at which the employer and the employee make the agreement.

When restrictive covenants are part of an employment contract signed at the time of hire, the employee receives something in exchange: a job.

A slightly more complicated scenario arises when an employer decides to ask an existing employee for a post-employment restrictive covenant. Because the employee already has a job, he or she receives nothing new in exchange for his or her promise. Some states have found that the promise of continued employment is adequate consideration, but other states have found employers must offer additional consideration to existing employees. Yet other states, like Oklahoma, do not have a clear-cut rule.

To ensure these contracts are enforceable, Employers should consider including desired post-employment restrictive covenants with offers of promotion, raises, a non-nominal payment, or another benefit, like additional vacation days. There is no specific amount an employee must receive, but it should reflect the employee’s position, salary, and the scope of the post-employment restrictive covenant sought.

Please note that the foregoing is not legal advice. For additional information pertaining to the rules of your specific state, please contact a lawyer licensed in your state.