Human CapitalLegal
Employee Restrictive Covenants
Also known as: Non-solicit, confidentiality agreement, restrictive covenant package
A non-compete, non-solicit, and confidentiality agreement signed by senior employees as a condition of employment. Without them, the buyer prices the risk that talent and customer relationships walk out the door.
WHY IT MATTERS
The non-compete a founder never asked their best people to sign costs nothing to put in place and everything to not have. At exit, the buyer's HR advisor asks for the non-compete file. When there is no file, the buyer models the competitive-departure scenario: a senior employee with deep customer ties leaving for a competitor with no contractual restriction to prevent it. The discount is applied to every unprotected key person, not just the one who happens to test the gap during the deal. The fix cannot be installed during a sale process — a non-compete signed in the presence of a deal is one a buyer will view with suspicion, a court may not enforce, and an employee's attorney will push back on. The right time is at hiring or promotion, with consideration (a bonus, raise, or the promotion itself). Non-solicits layered alongside non-competes are generally easier to enforce and survive legal challenge better. Coverage should extend to every employee with material customer relationships, not just the C-suite.