Labor: Restrictive Covenants and High-Level Executives

When it comes to restrictive covenants (non-competes, non-solicitation and non-disclosure agreements) for high-level executives, many companies think that "more is more." Because high-level executives make more money, have more responsibilities and are given greater access to trade secrets, confidential strategies and other proprietary corporate information, the typical corporate mindset is that executive restrictive covenants should have longer durations, cover more activities and have nationwide (and even global) geographic restrictions. The tactic of imposing such onerous restrictive covenants on high-level executives, however, may be bad for business and legally risky.

Up to 60 percent of high-performing employees plan to leave their organizations within the next year, recent research shows. With this expected talent drain, organizations need to have limited and enforceable restrictions in place to help deal with departing employees, but also to enhance their ability to recruit high-performing executives who are leaving their prior firms.

Paul E. Starkman

Paul Starkman is one of the leaders of the labor and employment law practice group at Pedersen & Houpt.

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