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A Restrictive Covenant Agreement legally limits what employees can do during and after their employment. In German business practice, these contracts protect company interests by preventing workers from competing directly, sharing trade secrets, or poaching clients and colleagues for a set period.

Under German labor law, these agreements must be reasonable in scope and duration, typically lasting no more than two years after employment ends. They also require fair compensation - employers must pay at least half the employee's last salary during the restriction period. Courts carefully balance business protection against workers' rights to pursue their careers.

Use a Restrictive Covenant Agreement when hiring employees who will access sensitive business information or develop close client relationships. This is especially important for roles in German technology firms, consulting companies, or sales positions where staff regularly handle trade secrets, customer data, or proprietary methods.

The agreement must be signed before employment starts - adding it later requires additional compensation under German law. Focus on protecting specific business interests: customer relationships, confidential information, or specialized knowledge that could harm your company if used by competitors. Remember that broad, general restrictions rarely hold up in German labor courts.

• Employee Covenant Agreement: Focuses on post-employment restrictions for regular employees, covering non-compete clauses and client contact limitations. Typically used for standard staff positions with moderate access to sensitive information.
• Protective Covenant Agreement: Enhanced protection for senior roles or specialists, including detailed provisions for intellectual property, trade secrets, and broader non-solicitation terms. Often includes higher compensation requirements and longer restriction periods.

• Employers: German companies draft and enforce these agreements to protect business interests. HR departments and legal teams typically customize the terms based on role sensitivity and industry requirements.
• Employees: Mainly affects senior managers, sales representatives, technical specialists, and others with access to confidential information or valuable client relationships.
• Legal Counsel: Both in-house and external lawyers review and adapt Restrictive Covenant Agreements to ensure compliance with German labor law requirements.
• Works Councils: Often review these agreements to ensure fair treatment and proper compensation for affected employees.

• Define Scope: List specific business interests needing protection - client relationships, trade secrets, or specialized knowledge.
• Calculate Compensation: Determine post-employment compensation (minimum 50% of last salary) and duration (maximum 2 years).
• Map Restrictions: Outline geographical limits and specific prohibited activities based on the employee's role.
• Document Access: List all confidential information and resources the employee will handle.
• Generate Agreement: Use our platform to create a legally compliant document that includes all required elements under German law.

• Parties and Role Details: Full identification of employer and employee, plus specific job position and duties covered.
• Scope of Restrictions: Clear definition of prohibited activities, geographical limits, and duration (max 2 years).
• Compensation Terms: Detailed post-employment payment schedule, minimum 50% of last salary.
• Protected Interests: Specific business secrets, client relationships, and confidential information being safeguarded.
• Severability Clause: Statement ensuring partial invalidity doesn't void entire agreement under German law.
• Notice Requirements: Procedures for enforcing or waiving covenant rights during notice period.

A Restrictive Covenant Agreement differs significantly from an Advisor Agreement in both scope and legal implications under German law. While both protect business interests, they serve distinct purposes and operate under different legal frameworks.

• Duration and Compensation: Restrictive covenants must provide 50% salary compensation and are limited to 2 years, while advisor agreements can run indefinitely without mandatory compensation requirements.
• Enforcement Scope: Restrictive covenants directly limit future employment activities, while advisor agreements focus on current consulting relationships and confidentiality.
• Legal Framework: Restrictive covenants fall under strict German employment law protections, whereas advisor agreements operate under more flexible commercial contract laws.
• Primary Purpose: Restrictive covenants prevent competition and protect trade secrets post-employment, while advisor agreements establish terms for ongoing professional services and expertise sharing.