Restraint of Trade Clauses in Employment Contracts

When it comes to employment contracts, there are a lot of clauses that employees should be aware of before signing on the dotted line. One of these clauses is known as a restraint of trade clause, and it can have a significant impact on your future job prospects if you aren`t careful.

In its simplest form, a restraint of trade clause is a provision in an employment contract that prohibits an employee from working for a competitor or starting their own competing business within a certain timeframe after leaving their current position. These clauses are often included in contracts to protect the interests of the employer, particularly if the employee has access to sensitive information or trade secrets that could be used by a competitor.

However, restraint of trade clauses can also be used to unfairly restrict an employee`s future job opportunities. For example, if the clause is too broad or the timeframe is too long, it could prevent the employee from finding work in their industry for an extended period of time after leaving their current company.

To protect themselves from the negative effects of restraint of trade clauses, employees should carefully review their employment contracts before signing. Here are a few things to look out for:

– The scope of the clause. Make sure that the clause is specific about what types of competing businesses you are prohibited from working for. A clause that simply prohibits you from working for “any competitor” is too broad and could be overly restrictive.

– The duration of the clause. Restraint of trade clauses should have a specific timeframe, such as six months or one year, after which the restriction is lifted. If the timeframe is too long, it could prevent you from finding work in your industry for an unreasonable amount of time.

– The geographic scope of the clause. If the restraint of trade clause is limited to a specific geographic area, make sure that it is a reasonable restriction. For example, if you work in a small town, a clause that prohibits you from working for a competitor within a 50-mile radius could be overly restrictive.

If you are uncomfortable with the terms of the restraint of trade clause in your employment contract, you can try negotiating with your employer to make the clause more reasonable. You may also want to consult with an employment attorney to make sure that your rights are protected.

In conclusion, restraint of trade clauses are an important consideration when signing an employment contract. Make sure that you understand the terms of the clause and how they could impact your future job prospects before signing on the dotted line. By taking the time to review your contract carefully, you can protect yourself from overly restrictive clauses that could limit your career options in the future.