Executives command excellent compensation for their services. They often have a lengthy and complex contract explaining what compensation they will receive and what obligations they have to the company.
Many executives negotiating a contract for a new position will focus on compensation, benefits, severance packages and other financial matters. They may pay less attention to non-financial terms, like restrictive covenants.
However, restrictive covenants could potentially affect your future income in a negative way, which might necessitate careful negotiation when you take a new job.
How restrictive covenants could hurt you
It is common for companies to have executives agree to multiple restrictive covenants as part of the hiring process. The company may request a non-compete agreement that prevents you from starting another business or going to a competing company for a certain amount of time after you leave.
They may ask you to sign a non-solicitation agreement that prevents you from hiring your subordinates or other company employees after you leave or trying to solicit contracts from customers or clients you meet in your position. Finally, they may ask you to sign a non-disclosure agreement so that you can’t share details of what you learned at the company with others.
Negotiating the specific terms of these restrictive covenants could help you if you leave the company as you move on to a new employer or start your own business. Knowing what terms will affect you and how can help you as you negotiate your contract as an executive. That’s why legal guidance is often advisable.
