Restrictive covenants in the US: navigating the quagmire of enforceability

By Barbara J Harris

Post-employment restrictive covenants in the context of employment relationships have long posed challenges for employers. Both the nature of the agreement and the context in which it is entered into affect the enforceability of restrictive covenants. The lack of a unified or ‘national’ body of law on restrictive covenants within the US further complicates the issue.

For example, in some states, restrictive covenants are governed by the common law of contracts and will generally be enforced if they are ‘reasonable’ under the circumstances. Yet even the concept of what is ‘reasonable’ varies from state to state. Other states have enacted statutes specifically governing restrictive covenants, often imposing strict requirements on the enforcement of the covenants and, in some cases, virtually prohibiting them.

Ultimately, the enforceability of any restrictive covenant will depend on which state’s law applies, which in turn may depend on where the dispute is litigated…

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