Employment Contract Restraint of Trade Clause Explained
When you sign an employment contract, you are agreeing to various terms and conditions that outline your rights and responsibilities as an employee. One important aspect of these agreements is the restraint of trade clause, which can have a significant impact on your career prospects both during and after your time with the company. In this article, we will explore what exactly a restraint of trade clause is, what it typically includes, and what you need to know as an employee.
What is a restraint of trade clause?
A restraint of trade (ROT) clause is a contract provision that limits an employee`s ability to work in a specific industry or for a competing company for a certain period of time after leaving their current employer. The goal of such provisions is typically to protect the employer`s business interests by preventing former employees from using the knowledge, skills, and contacts they gained while working for the company to benefit a competitor or start their own competing business.
What does a typical ROT clause include?
The specific terms of a ROT clause can vary widely depending on the industry, employer, and job requirements, but some common elements can include:
– Geographical limitations: Typically, the clause will define a specific geographic area where the employee is restricted from working. This can be a local region, a specific state, or even the entire country.
– Timeframe: The clause will also specify how long the restrictions will be in place. This can range from a few months to several years, depending on the industry and the employee`s role.
– Industry limitations: The clause can also define a particular industry or type of work that the employee is prohibited from engaging in. This can be a broad category like “retail,” or it can be very specific, such as “selling software to healthcare providers.”
What are the consequences of violating a ROT clause?
If you violate a ROT clause, the consequences can be severe. Most commonly, the employer will seek an injunction to prevent you from continuing to work in the restricted area or industry. They may also seek damages for any financial harm that the violation caused to their business. Additionally, if you signed a non-compete agreement as part of the same employment contract, violating the ROT clause could lead to a breach of that agreement as well.
What should you know as an employee?
If you are considering a job that includes a ROT clause in the contract, there are several things you should keep in mind:
– Read the clause carefully and make sure you understand exactly what it restricts. If you have any questions or concerns, ask your employer or a lawyer to clarify.
– Negotiate the terms if possible. Depending on the industry and the employer`s needs, you may be able to negotiate a less restrictive clause that allows you to work in a related industry or geographic area.
– Keep in mind that violating a ROT clause can have serious consequences. If you plan to work in the same industry or region after leaving your current job, make sure you are aware of the restrictions and plan accordingly.
Overall, a restraint of trade clause can be an important consideration when evaluating a job offer or signing an employment contract. By understanding the specifics of the clause and your obligations as an employee, you can make informed decisions about your career and avoid potentially costly violations.