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RESTRICTIVE COVENANTS 101

Without signed agreements, the world of business would be in a world of trouble. Agreements enable people to trust one another enough to move forward as a team. This trust is essential, and that's why there are consequences when the trust is broken. The thing is, there are hundreds of different legal agreements in the business world, and if it isn't your job to know about them all, you can end up taken advantage of. That is where we come in. At our law firm, we're familiar with business agreements, and we feel privileged to assist businesses in this essential area.

Let's face it: if we all could run our businesses alone and without competition, we would. Unfortunately, that isn't possible. If you experience any sort of success, you'll have opponents and you'll have to expand your team - your circle of trust. This is one of the more scary parts of running a business. You're sure to find some great employees, and creating jobs is great. But what if you hire a bad apple? It its best, a weak link slows a business down; at its worst, it can destroy the business. The good news is, restrictive covenants are here to protect the business you've worked so hard to build.

WHAT IS A RESTRICTIVE COVENANT?

A covenant is a promise within a contract. A "restrictive covenant" indicates a party's willingness to be restricted by the contract. It means that if you sign a contract, you have to follow through, and if you don't, there will be trouble. Because agreements are the foundation of business, restrictive covenants are very important. They can be signed between employer and employee or one company and another. The most common type is signed between employee and employer.

TYPES OF RESTRICTIVE COVENANTS

  • Non-Compete Agreement: two parties agree not to compete with each other. Most commonly, it's an employee and the employer. The contract restricts competition during a specific amount of time and within a certain geographical area.
  • Non-Disclosure Agreement: this agreement protects companies by restricting communications. One party promises not to give out processes, trade secrets, or specific activities belonging to a business.
  • Non-Solicitation Agreement: one party agrees to restrict their marketing and hiring to not affect customers or employees from the other. It's basically a promise to play fair.

WHERE DO RESTRICTIVE COVENANTS SHOW UP?

  • Employment Situations: when a company invests heavily in an employee via incentives, signing bonuses, and training, a restrictive covenant protects that investment. It
  • Partnership Agreements: restrictive covenants bulk up business agreements by preventing information leaks and harmful solicitation. They are especially important when a new partner enters an existing business.
  • Business Sales: when someone buys a business, they don't want the former owner to leak information about the company. An agreement like this can also restrict a former company owner from hiring employees away or stealing customers.

ARE RESTRICTIVE COVENANTS UNIVERSALLY ENFORCED?

It depends on the state, because restrictive covenants are enforced by state government. If you are considering a restrictive covenant, get the help of our attorneys. We know how commercial litigation works in New York, and we will draft an agreement that you can depend on. Learn more today!

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Quatela Chimeri, PLLC
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Hauppauge, NY 11788

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