Insights from Synergy’s October 1st Legal Roundtable on Restrictive Covenants
On October 1st, Synergy members joined legal experts Anthony Bottenfield and John Landesman with Cohen Seglias to unpack the evolving world of employee agreements, including non-competes, non-solicits, confidentiality clauses, and severance agreements. With state laws tightening and the FTC’s proposed non-compete ban making headlines earlier this year, it’s more important than ever for contractors to understand how to protect their business, and stay compliant.
Here are the top five takeaways from our roundtable that every contractor should know when it comes to restrictive covenants and severance strategies:
1. Non-competes aren’t dead, but they’re under pressure
Despite the FTC’s attempt to ban non-compete agreements nationwide, that proposal was challenged in court and abandoned after the change in administration. That means non-competes remain enforceable in most states, but state-by-state restrictions continue to grow.
- California and a handful of other states have banned non-competes entirely
- In many states, enforcement depends on how “reasonable” the agreement is – especially around geography, duration, and business interests
Contractors should review their agreements regularly and understand the specific laws in the states where they operate.
2. Restrictive covenants are not one-size-fits-all
There are three primary types of restrictive covenants:
- Non-compete – Prevents employees from working for a competitor
- Non-solicitation – Prohibits solicitation of clients or employees
- Confidentiality – Protects sensitive business information
The key message from the webinar? Tailor your agreements to the specific role and business risk. A sales manager might need all three. An entry-level technician? Probably not.
Avoid generic, copy-and-paste agreements. Judges are increasingly skeptical of broad or vague contracts. Instead, get specific – name competitors, define territory, and limit the duration.
3. Use the right timing – or risk enforceability
The best time to implement restrictive covenants is at the time of hire. If you’re introducing them to existing employees, you may be required to provide additional consideration (such as a bonus or promotion) in certain states.
Waiting too long can not only create legal risk, it can also harm trust and morale.
4. Not every employee needs to sign one
Restrictive covenants should be reserved for roles where a departure would pose a genuine competitive risk. Think:
- Sales and business development
- Executives and department heads
- R&D or field engineers with proprietary knowledge
- Senior finance staff with access to sensitive company data
Blanket policies applied to all employees, especially hourly or field staff, are not only excessive, but less likely to hold up in court.
5. Severance and enforcement strategies matter
If an agreement is violated, the next steps matter. A standard enforcement strategy includes:
- Sending a cease and desist to the former employee and their new employer
- Filing for a temporary restraining order (TRO) or injunction if needed
- Being prepared for settlement, or a drawn-out legal process
Severance agreements, meanwhile, need to follow federal law, especially if the employee is over 40. The Older Workers Benefit Protection Act (OWBPA) outlines specific language and waiting periods for enforceability.
And if you’re wondering whether your insurance will cover a non-compete dispute? Most Employment Practices Liability Insurance (EPLI) policies don’t. That makes it even more critical to get these agreements right from the start.
Final Thoughts
Members who missed the webinar and would like to access the recording or to connect with our presenters, can find the recording and presentation on OneHub.
