A restrictive covenant waiver clause eliminates or reduces the enforceability of restrictive covenants—provisions that typically limit a party's ability to compete, solicit customers or employees, or use confidential information after a business relationship ends. By waiving these restrictions, the clause allows a party (often an employee, contractor, or departing partner) to engage in activities that would normally be prohibited. This waiver might be conditional (applying only in certain circumstances, such as if the other party breaches) or unconditional, and it fundamentally shifts the risk allocation regarding post-relationship competitive activity.
The presence of a restrictive covenant waiver is unusual and typically appears in contexts where one party has negotiated significant leverage or where the parties have agreed that traditional restrictions are unnecessary or unenforceable. However, this clause is categorized under "liability" because waiving restrictive covenants increases the risk that a party will face competitive harm, loss of trade secrets, or customer defection without legal recourse. For example, an employer waiving non-compete restrictions might find that a key employee immediately launches a competing business using confidential client lists. The waiver essentially removes a protective mechanism that would otherwise limit liability exposure.
Approach restrictive covenant waivers with extreme caution and only agree to them if you receive substantial offsetting consideration or if you genuinely do not fear competitive harm. If you must include a waiver, make it conditional—for instance, waiving non-competes only if the other party pays severance or meets specific performance obligations. Never waive confidentiality or trade secret protections, as these are distinct from non-competes and serve a different protective function. If you're the beneficiary of a waiver, document in writing exactly what activities you're now permitted to undertake to avoid future disputes.
Frequently Asked Questions
What does this clause mean in simple terms?
A restrictive covenant waiver clause eliminates or reduces the enforceability of restrictive covenants—provisions that typically limit a party's ability to compete, solicit customers or employees, or use confidential information after a business relationship ends.
Why should I care about this clause?
By waiving these restrictions, the clause allows a party (often an employee, contractor, or departing partner) to engage in activities that would normally be prohibited.
What are my options?
This waiver might be conditional (applying only in certain circumstances, such as if the other party breaches) or unconditional, and it fundamentally shifts the risk allocation regarding post-relationship competitive activity.
How does this affect small businesses?
The presence of a restrictive covenant waiver is unusual and typically appears in contexts where one party has negotiated significant leverage or where the parties have agreed that traditional restrictions are unnecessary or unenforceable.