The final requirement is contractual capacity. This refers to the fact that the parties must be of sound mind and body and of a certain minimum age. Generally employment contracts are in writing in order to make them easier to enforce. Employment contracts generally discuss the nature of work the employee will be performing for the employer, the manner in which the employer will compensate the employee, benefits, holidays, leave, legal restrictions which an employer can impose on an employee, etc. Such clauses are generally enforceable only if the payment is considered liquidated damages and not a penalty and such amounts bear a reasonable relationship to the expenses actually incurred by the employer for the employee.
Most restrictive covenants are enforceable, although they are interpreted narrowly by the courts.
This means that they are read literally and are not given a broad, expansive interpretation. If there is any ambiguity in the language, the courts will generally not stretch the restrictive covenant beyond its literal or generally understood meaning. If a covenant is violated, the court may impose stiff penalties against the employee, provided the covenant is found to be legally enforceable. A standard clause in today's employment contract is the covenant not to compete. Generally, such a clause in an employment contract would prohibit the employee from competing with the employer during employment and for a stated period of time thereafter.