Definition and Types of Restrictive Covenants
Philippine contracts law recognize confidentiality, non-disclosure, non-solicitation, and non-compete agreements as types of restrictive covenants.
Confidentiality and non-disclosure agreements serve as legally binding agreements that restrict individuals from sharing any confidential or proprietary information with competitors or any other interested third parties. On the other hand, non-solicitation agreements are also restrictive covenants that prohibit employees from enticing their colleagues to leave their current employer and join a competitor. Additionally, these agreements forbid individuals from persuading customers or vendors of their employer to switch their business to a competing company.
Lastly, non-compete agreements are specifically designed to prevent employees from engaging in work within a field, practice, or business area that directly competes with their former employer. These agreements aim to safeguard the interests and competitive advantage of the employer, ensuring that their former employees do not pose a potential threat by leveraging their knowledge and expertise in a rival company.
In determining whether the these restrictions are reasonable or not, the trial court should consider the following factors: (a) whether the covenant protects a legitimate business interest of the employer; (b) whether the covenant creates an undue burden on the employee; (c) whether the covenant is injurious to the public welfare; (d) whether the time and territorial limitations contained in the covenant are reasonable; and (e) whether the restraint is reasonable from the standpoint of public policy.
