Employment Contract Restrictive Covenant

I work for an IT Consulting firm. The contract that I signed upon taking the position contains a Restrictive Covenant that, in turn, contains a section stating that: during my employment and for a period of 18 months following termination (for any reason) I may not hire any employee of my Employer, nor induce any employee to work for me or anyone else.

My question is this: I and 2 other fellow employees would like to start a company in which we would be equal partners. This company does not compete with the business of our employer but it would potentially lead to us all leaving our Employer to work full time on this business. Are we violating the agreement? What are the potential consequences of going through with this partnership?

1 answer  |  asked Mar 13, 2002 9:53 PM [EST]  |  applies to Ohio

Answers (1)

Neil Klingshirn
Form a company and let it hire your co-workers

Restrictive covenants, including non-recruits, are contracts. Whether your non-recruit contract prevents you and your co-workers from partnering up to form a new company is purely a matter of contract interpretation. That is, the contract says what it means and means what it says.

That said, two ways to deal with clauses like these are to 1) avoid any recruiting by all of you deciding on your own to leave and 2) form a new company that employs each of you. Be aware, however, that while this may technically avoid a contract violation, it still has to pass the test of not being too cute, since most restrictive covenants contain language that says you may not do something "either directly or indirectly", which would then cover the tactics that I just described.

Best regards,

Neil Klingshirn.

posted by Neil Klingshirn  |  Mar 14, 2002 10:07 AM [EST]

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