Restrictive Covenants in the U.S. and Europe

U.S. courts generally enforce non-compete agreements, but the standards of enforcement vary from state to state. Only California, North Dakota, and Oklahoma do not enforce post-employment restrictions as a matter of law. Agreements governing confidentiality, customer non-solicitation and employee non-solicitation provide more targeted protection than non-compete agreements, and often are more palatable to reviewing courts.

Non-competes must meet certain general requirements to be enforceable. Employees should receive something of value in exchange for the restriction, the covenant must serve a legitimate business interest, and the operative length of time and geographic scope of the restriction must be reasonable.

In the United Kingdom, employees owe a duty of confidence not to misuse or disclose trade secrets, and that duty extends beyond the termination of their employment. Non-compete agreements are generally enforceable against senior executives or those in technical or R&D roles.

In France, non-compete clauses must reasonably relate to the employee’s job requirements and must protect the employer’s business interests, and they cannot stifle fair competition. In Germany, to extend protections beyond the termination of employment, the employer and employee may agree to a restrictive covenant that protects a legitimate business interest of the employer and is reasonable in territory, time and scope.

A narrow and precise restrictive covenant can target specific risks and protect a business’s valuable intangible assets, while minimizing undue impact on former employees.