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Restrictive covenants and breach of contract disputes

On Behalf of | Feb 3, 2022 | Contract Disputes

No matter the factors involved, it is not uncommon for a business to reach its conclusion, partnerships to dissolve or employees to leave. When this happens, parties must ensure they follow proper protocols as laid out in the carefully designed business contracts and employment agreements. Unfortunately, breach of contract is a common occurrence no matter the size or age of an organization.

While breaches of contract can occur based on any type of agreement including a vendor contract, employee handbook or partnership agreement, they often relate to restrictive covenants. These provisions are common inclusions when writing any type of employment contract and can cover a broad range of topics, including:

  • Nondisclosure agreements: Often abbreviated as an NDA, this might be the most common form of a restrictive covenant. The NDA is usually in place to prevent employees, vendors or contractors from divulging sensitive material or trade secrets. When a former employee breaks this agreement, however, it can have a catastrophic impact on the health of the business.
  • Noncompete agreements: When anyone leaves the organization, they nearly always must follow the provisions in a noncompete agreement. This restrictive covenant usually dictates a region and length of time that a former employee cannot seek work at a competing organization. These contracts are generally in place for any employee, manager, supervisor or partner who has access to sensitive information regarding trade secrets, intellectual property or business processes.
  • Non-solicitation agreements: These agreements are often in place to ensure a former employee will not solicit the organization’s current, prior or prospective customers to come to the new organization.
  • Non-recruiting agreements: Similar to the non-solicitation agreement, the non-recruiting agreement is in place to ensure the former employee does not recruit the organization’s workers at any level to leave for the new business.

It is not uncommon for a breach of business contract to lead to litigation. Business law can be a complex, intimidating method of dispute resolution, but it is often necessary due to the complicated nature of most business contracts and employment agreements. Business owners must take steps to protect themselves and the growth of their organization from start to finish.