Common Restrictive Covenants in International Assignments: Advantages and Disadvantages

Global mobility effectiveness can be hampered by the actions of former employees, who may be tempted use the information and contacts gained from an assignment for professional or financial gain. To prevent this activity, global employers will often use contractual covenants to impose a range of post termination restrictions on former employees.

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Sep 24, 2018
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Global mobility effectiveness can be hampered by the actions of former employees, who may be tempted use the information and contacts gained from an assignment for professional or financial gain.  To prevent this activity, global employers will often use contractual covenants to impose a range of post termination restrictions on former employees.

As discussed in a previous article, those restrictive covenants may not be valid or enforceable in every foreign country, but nonetheless are a crucial part of employment agreements and protect the employers business interests.

Frequently Used Post-Termination Restrictions in Global Mobility

1. Non-competition Covenants

Non-competition covenants are those contract clauses that restrict an employee from accepting a similar position with a competitor of the original employer.  In order to be enforceable in most countries, non-compete clauses cannot have an open-ended duration.  In other words, there should be some time limit in the covenant that is reasonable.

Some countries will have statutes that limit the duration of a non-compete clause, and those statutory limits would override any terms of longer duration contained in the employment contract.

Advantages

Non-compete covenants can be valuable to a company that invest a great deal of time and money in a highly skilled employee, to keep them from using that expertise to aid a competitor.  They may be especially important when structuring an international assignment where the employee could be introduced to new opportunities and position offers.

Disadvantages

The primary disadvantage of non-compete clause is that in some countries they may be either limited in time and geography, or even completely prohibited.  Some jurisdictions will allow them, but will require the former employee to be paid some percentage of their former wages while in effect.  In the worst case, the employee would be permitted to seek work with a competitor regardless of the terms of the employment agreement.

2. Non-solicitation Covenants

Non- solicitation covenants will prohibit an employee from contacting and/or soliciting the business of the former employer’s clients and customers.  These covenants are used to prevent an employee from using customer contacts to start their own business, or for use in a position with a new employer.

Advantages

When an employee is sent on assignment they may gain personal contact and rapport with the company’s customer base in the region.  A non-solicitation clause will prevent them from using those contacts for professional gain.

Disadvantages

While they may have a deterrent effect, actually tracking and demonstrating solicitation could be difficult, and just like non-competes, a country might limit the clause in its scope of enforcement...read more

Shield GEO makes international employment simple. Our customers use Shield GEO to employ and payroll hundreds of workers in over fifty countries. Find out more.

Go to the profile of Tim Burgess

Tim Burgess

Director, Shield GEO Services Ltd

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