Restraint of Trade Clause Employment Contract

When starting a new job, you may be asked to sign an employment contract that includes a restraint of trade clause. This clause is meant to protect the company`s interests, but it can also limit your career options and earning potential. Here`s what you need to know about restraint of trade clauses in employment contracts:

What is a restraint of trade clause?

A restraint of trade clause is a provision in an employment contract that restricts an employee`s ability to work for a competitor or start a competing business after leaving the company. This clause typically includes a time frame and geographical area in which the employee cannot engage in certain activities that might harm the employer`s business.

Why do companies use restraint of trade clauses?

Companies use restraint of trade clauses to protect their trade secrets, confidential information, and client relationships. For example, if you work for a software company, your employer might not want you to start a competing business that uses their proprietary software code. Or, if you work for a law firm, your employer might not want you to take their clients with you when you leave.

What are the potential drawbacks of restraint of trade clauses?

Restraint of trade clauses can be a double-edged sword. On the one hand, they can protect your employer and ensure that you don`t engage in activities that could harm their business. On the other hand, they can limit your career options and earning potential. If you`re bound by a restraint of trade clause, you may not be able to work for a competitor or start your own business in the same industry for a specified period of time. This can be especially challenging if you work in a niche or specialized field where there are few job opportunities.

What should you do if you`re asked to sign an employment contract with a restraint of trade clause?

Before signing an employment contract with a restraint of trade clause, it`s important to carefully review the terms and seek legal advice if necessary. You`ll want to make sure that the time frame and geographical area are reasonable and that the clause doesn`t overly restrict your ability to earn a living. If you`re not comfortable with the terms of the clause, you can try negotiating with your employer to see if they`re willing to modify it.

In conclusion, restraint of trade clauses are a common feature of employment contracts, but they need to be carefully considered before signing. By understanding your rights and seeking legal advice if necessary, you can ensure that the clause doesn`t unnecessarily limit your future career options and earnings potential.