Include Restrictive Covenants in Equity Grants? Why Not?
Many companies require all new hires to sign restrictive covenant agreements (e.g., non-compete, non-solicitation, confidentiality and non-disclosure). While the enforceability of such provisions varies by state, courts often take a dim view of such agreements (particularly those with non-competes), and are reluctant to enforce provisions that are not reasonable in duration, geography or scope of duties. Two recent decisions, however, strongly suggest that courts outside of California will enforce online restrictive covenants in stock award agreements.