Restrictive covenant

A negative covenant that restricts the way in which a party can act, for example the way in which land may be used or what an employee can do.

In employment contracts to protect the employer's business by restricting the activities of an employee, generally after the employment has ended. Based on the restraint of trade principle that an individual should be free to follow his trade and use his skills without undue interference.

For further information, see Practice notes, Restrictive covenants in employment contracts and Atypical restrictive covenants.