Restrictive Covenants and Non-Competes in Executive Contracts

When a Non-Compete Becomes a Post-Employment Problem

The employment agreement sitting in your inbox looks routine until you reach the restrictive covenants section — usually buried three or four pages in, after base salary and bonus targets. That section decides what you can do for the next twelve, eighteen, or twenty-four months after you leave, whether you resign, get terminated without cause, or are pushed out after a change of control. Most executives sign it without pushback because the compensation numbers above it are the visible negotiation. The covenants below them are not.

That is a mistake with a long tail. A non-compete written broadly enough can block you from an entire industry segment, not just a direct competitor. A non-solicitation clause can reach further than you think — former colleagues, not just customers. And because these clauses activate only after you are gone, you often discover their real scope during a job search, not during contract review, when you have the least leverage to renegotiate them.

This article walks through how to read restrictive covenants and non-competes in an executive contract before you sign, what terms are negotiable, and how they interact with the severance and change-of-control pay you are also negotiating — so the exit terms and the entry terms work together instead of against you.

Reading the Restrictive Covenants in an Executive Contract

Restrictive covenants in executive contracts typically cluster into four categories: non-compete, non-solicitation, non-disparagement, and confidentiality. Each does a different job, and each should be read on its own terms rather than as a single undifferentiated "restrictions" clause.

The non-compete restricts you from working for, consulting for, or holding equity in a competing business for a defined period after departure. The non-solicitation clause restricts you from recruiting former colleagues or soliciting former clients — often for a longer period than the non-compete, since it is easier to defend legally. Non-disparagement restricts public or private statements about the company, its board, or its executives. Confidentiality obligations on trade secrets and proprietary information are usually indefinite and survive regardless of what happens to the other covenants.

The enforceability of a non-compete specifically depends heavily on the state governing the contract — some states limit duration, require separate consideration, or bar post-employment non-competes for certain roles outright. This is not a point to estimate; confirm the current treatment in your governing state with employment counsel before assuming any covenant is enforceable as written, since state law on this point changes and varies widely.

Non-Compete Duration, Geography, and Scope: What to Negotiate

Three variables define how much a non-compete actually costs you: duration, geography, and scope of restricted activity. All three are negotiable, and none should be accepted at the first draft.

Duration is usually expressed in months post-termination — six, twelve, eighteen, or twenty-four. Longer durations are more defensible to the company if paired with continued pay during that period (a "garden leave" arrangement) rather than an unpaid restriction. If the company wants eighteen months of restriction, ask whether it will pay eighteen months of salary continuation to match — the request itself is a reasonable, standard ask, not an aggressive one.

Geography ranges from a defined metro area to "anywhere the company does business," which for a multinational employer can mean global. A geography clause that broad is worth pushing back on directly: ask for it to be scoped to markets or business lines you actually worked in, not the company's full footprint.

Scope is the definition of "competing business." A narrow scope names specific competitors or a specific product category. A broad scope defines competition by industry sector, which can sweep in companies you would not consider direct rivals. Before signing, ask for a named list of competitors the clause is meant to cover, or a definition tight enough that you could name the boundary yourself.

Non-Solicitation, Non-Disparagement, and Confidentiality Clauses

Non-solicitation clauses deserve separate attention because they are broader in practice than they look on paper. A "no solicitation of clients" clause is different from "no solicitation of clients you personally serviced" — the latter is dramatically narrower and more defensible to negotiate for. The same logic applies to employee non-solicitation: restricting you from actively recruiting former colleagues is different from restricting you from hiring anyone who applies to you unprompted.

Non-disparagement clauses are usually mutual in a well-negotiated agreement — the company agrees not to disparage you, in exchange for you agreeing not to disparage it. If the draft you received is one-directional, that asymmetry is worth flagging before signing, not after a dispute arises.

Confidentiality obligations are the least negotiable of the four, and reasonably so — trade secret and proprietary information protection typically survives indefinitely and applies regardless of how or why you leave. The negotiable point here is usually the definition of what counts as confidential, not the duration of the obligation itself.

How Restrictive Covenants Interact with Severance and Change-of-Control Pay

Restrictive covenants do not exist in isolation from the rest of your contract — they should be read alongside the severance and change-of-control terms, because the two are meant to offset each other. A change-of-control cash severance package for a CEO typically runs around three times salary plus bonus, with other named executive officers typically receiving two to three times, per CompensationStandards.com's 2007 analysis of CIC arrangements. More recent data from Alvarez & Marsal's 2022 review found two-to-2.99-times total compensation is the most common CEO cash severance multiple in change-of-control packages, with accelerated equity vesting typically the largest single component of the package.

Those multiples matter directly to covenant negotiation: a longer or broader non-compete is a stronger ask from the company when it comes with a correspondingly larger severance number, not a smaller one. If your draft pairs an aggressive eighteen-month non-compete with a minimal severance floor, that mismatch — not the covenant language alone — is the point to raise.

One more mechanical detail worth knowing: under IRC Section 280G, if the present value of your change-of-control payments reaches three times your "base amount" (a defined average of prior compensation), the excess above one times that base amount is subject to a 20% excise tax, and the company loses its tax deduction on that excess, per Plante Moran's 2021 summary of the rule. This is a tax mechanic, not a covenant term, but it shapes how a company structures the severance that is meant to offset your restrictive covenants — worth confirming with tax counsel if your package approaches that threshold.

A covenant that survives your departure should be priced into the compensation that gets you to sign it — not treated as a separate, unpaid obligation layered on top.

Departures themselves are common enough that this is not a hypothetical exercise: US companies recorded 2,032 CEO exits in 2025, down from a record 2,221 in 2024, according to Challenger, Gray & Christmas's 2026 report — and median S&P 500 CEO tenure has already fallen from 6.0 years in 2013 to 4.8 years in 2022, per the Harvard Law School Forum on Corporate Governance's 2023 analysis citing Equilar data. Shorter tenures mean more executives are living inside their post-employment covenants sooner than they expected.

Building a Negotiation Position Before You Sign

The leverage to negotiate restrictive covenants is highest before you sign, and drops sharply after. Before you respond to a draft, walk it against a checklist covering duration, geography, scope, solicitation definitions, mutuality of non-disparagement, and how the covenants offset against severance — the same review discipline that applies to the rest of the executive employment agreement, including clawback provisions that can claw back pay years after a covenant period ends.

If you are reviewing an incoming offer letter or preparing for a severance negotiation tied to an existing role, treat the covenants and the exit pay as one conversation, not two — a broader restriction should always come with a larger number attached, and a severance package negotiation is the natural place to raise it. The Severance & Change-of-Control Review Checklist walks through each covenant type against the pay terms meant to offset it, line by line, so nothing gets signed as boilerplate. It is available at the Severance & Change-of-Control Review Checklist.