2. Agenda
• What are restrictive covenants and
under what circumstances are they
enforceable?
• What type of remedies exist for breach
of restrictive covenants?
• How do you draft effective restrictive
covenants in employment agreements?
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3. Restrictive Covenants 101
• Contractual provisions which
restrict an employee's post-
employment activities
• Not favored by court and
strictly construed
• Used to stop employees from
using employer's property
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4. 4 Types of
Restrictive Covenants

5. Non-Solicitation Covenants
• Can prevent solicitation of a former
employer’s customers or employees
• A customer non-solicitation must be
restricted to customers with whom the
employee had contact or responsibility
for during a specified period
• An employee nonsolicitation must take
into effect how long it will be before the
former employee’s influence will be
eliminated or diminished
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6. Non-Dealing Covenants
• Focuses on whether an employee can
sell to customers who are not solicited
but approach him or her for competing
goods or services
• Avoids the need to prove that the
former employee made the solicitation
or approach
• More likely to be enforced where a
substantial personal connection
between employee and customers can
be established.
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7. Non-Competition Covenants
• Broadest form of protection that an employer
can include in employment agreements
• Enforceable if there exists a legitimate business
interest that cannot be protected by other types
of less burdensome restrictive covenants
• Enforced only if they are for a limited duration
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8. Garden Leave Provisions
• In exchange for advance notice of
employment termination, an employer
continues to pay the employee his full
salary and benefits but does not
require the employee to work during
the period of the advance notice
• The aim of garden leave provisions is
to preserve the status quo by keeping
the employee out of the market place
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9. Persons Not Subject to
Restrictive Covenants
• Lawyers
• Doctors
• Individuals Fired
Without Cause
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10. Requirements for Enforceability
1. Must be ancillary to the taking of employment
2. Must be supported by adequate consideration
3. Must be reasonably necessary to protect a
legitimate interest of the employer
4. Must be reasonably limited in duration and
geographic scope
5. Must be consonant with public interest
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11. Available Relief

12. Monetary Damages
• Monetary relief is available to recover any actual
damages that an employer has suffered as a result
of an employee’s breach of restrictive covenants
• It is inherently difficult to quantify monetary relief
• Monetary relief may include:
– Lost Profits
– Training/Replacement Costs
– Competitor's Profits
– Loss of Good Will
– Attorney’s Fees
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13. Injunctive Relief
• Most employers seek injunctive relief
• In most cases, the form of that injunctive relief is in the
nature of a temporary restraining order (TRO) or
preliminary injunction sought shortly after discovery of
the employee’s breach
• To obtain injunctive relief, an employer must show:
– Immediate and Irreparable Harm
– Reasonable Probability of Success on the Merits
– Balance of the Equities
– Public Interest
© 2012, Meyer, Unkovic & Scott LLP

14. Drafting Restrictive
Covenants

15. Know the Facts and Circumstances
• Avoid using “form”
employment agreements or
restrictive covenant language
• Know the facts and
circumstances surrounding
the employment of each
employee or group of
employees
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16. No Precise Formula For Drafting
• Courts look to each restrictive covenant and the facts to
determine whether the covenant will be enforceable.
• It is often times helpful to see what already has been
enforced by the court, but depending on your facts, the
covenant may nevertheless be unenforceable.
• Each covenant really should be drafted to meet the
specific needs of each employer and the position of the
employee.
© 2012, Meyer, Unkovic & Scott LLP

17. Covenants normally include:
• A recitation that the agreement is ancillary to the taking of employment and is a
precondition to the commencement of the employment relationship
• A recitation of when the restrictive covenants will be invoked, i.e., upon the
employee’s termination, whether voluntary or involuntary
• A prohibition of what conduct or activities are prohibited upon the employee’s
termination
• A statement of the period of time and limited geographic scope of the restrictive
covenants
• The employee’s acknowledgement and agreement that the restrictive covenants are
reasonable and valid in duration and scope and in all other respects
• The employee’s acknowledgment and agreement that he or she will be able to earn a
livelihood in the event that the employer seeks to enforce the restrictive covenants
© 2012, Meyer, Unkovic & Scott LLP

18. Covenants normally include: (continued)
• The employee’s agreement that the employer will suffer irreparable harm upon the
breach of the restrictive covenants which cannot be adequately compensated by
money damages alone
• The employer’s right to seek injunctive relief in addition to any other type of relief
necessary, including monetary damages in the event of an employee’s breach of the
restrictive covenants
• The employer’s right to recovery attorneys’ fees and costs as part of any action to
enforce the restrictive covenants or recover damages for their breach
• A choice of law provision, i.e., what state’s law will apply
• A choice of forum provision, i.e., what court will have jurisdiction to hear the dispute
• An assignability provision stating that the agreement and its restrictive covenants
may be assigned by the employer
© 2012, Meyer, Unkovic & Scott LLP

19. Conclusion
• Restrictive covenants constitute restraints of trade;
however, they are not per se unenforceable or invalid
• Employers must review the circumstances of
employment for every employee from whom they require
a restrictive covenant and then carefully draft the
covenant based upon the information derived
• “Form” restrictive covenants may be declared
unenforceable and not lead to the desired result
© 2012, Meyer, Unkovic & Scott LLP

20. Thank you!
Ronald L. Hicks, Jr.
Meyer, Unkovic & Scott LLP
Henry W. Oliver Building
535 Smithfield Street, Suite 1300
Pittsburgh, PA 15222
412.456.2800
www.muslaw.com
© 2012, Meyer, Unkovic & Scott LLP