Practical Law Glossary Item 9-382-3769 (Approx. 4 pages)
Glossary
Restrictive Covenant
Also known as a negative covenant. An agreement or promise restricting the person or persons giving the covenant from taking certain actions.
In an acquisition context, restrictive covenants can restrict actions of the parties both before and after the closing. They generally include covenants restricting the seller from:
Taking certain actions concerning the target company or business before the closing without the buyer's consent.
Competing with the target company or business for a specified period of time after the closing.
Hiring or soliciting employees transferred to the buyer in the acquisition for a specified period of time after the closing.
In a labor and employment context, restrictive covenants typically restrict activities of an employee following a separation of employment from the employer. Typical restrictive covenants include:
Non-compete provisions, prohibiting the employee from working for a competitor or in a competitive role at another employer for a specified period of time.
Non-solicit provisions, prohibiting the employee from soliciting customers or employees of the original employer for a specified period of time.
Non-disclosure provisions, prohibiting the employee from disclosing the employer's confidential and proprietary competitive information.
Non-disparagement provisions, restricting what an employee can or cannot say about the employer following a separation of employment.