With the number of job vacancies at a record high
and skill shortages
allowing employees to switch jobs easily to achieve the work/life balance they desire, employers need the legal tools to protect their commercial interests more than ever.
One way to curb highly skilled ex-employees being able to work for a competitor, set up a rival business, or poach your customers and/or staff is to include a restrictive covenant in their employment contract. In this article, our employment lawyers will explain everything you need to know about restrictive covenants.
What is a restrictive covenant?
A restrictive covenant is a clause in an employment contract
stating that an employee is prohibited from competing with their employer and/or cannot solicit or deal with the employer’s customers for a certain period after giving notice.
Are employee restrictive covenants legally enforceable?
Although employees who have resigned are often well-placed to take advantage of confidential information, strategic plans, customer and client details, or other information about their employer's business, the doctrine of restraint of trade states that a person must be free to work in their trade and use their skills to make a living without undue interference.
A covenant that restricts an employee from being free to work in their trade is, therefore, on face value, invalid unless it is designed to protect legitimate business interests and no wider than reasonably necessary.
What can I do to ensure the Employment Tribunal will uphold a restrictive covenant?
The Employment Tribunal will apply the following key principles when assessing whether or not to enforce a restrictive covenant:
- The restrictive covenant must protect the employer’s legitimate interests. Examples of legitimate interest include trade and supplier connections, existing employees, and confidential information. Restrictive covenants designed only to prevent competition are never upheld by the courts.
- The restrictive covenant “must afford no more than adequate protection to the benefit of the party in whose favour it is imposed."
- At the time the employment contract was entered into the restrictive covenant must have been reasonable.
To ensure any covenant you include in an employment contract will be enforced by the Employment Tribunal instruct an experienced Employment Law Solicitor
to advise you and draft the necessary clause/s.
What are the different types of employee restrictive covenants?
The most common types of restrictive covenants include:
- Non-competition covenants – prevents the ex-employee from working for a competing business.
- Non-solicitation covenants – prevents the ex-employee from soliciting your existing clients.
- Non-dealing covenants – prohibits the ex-employee from having any dealings with your existing clients, regardless of who makes the first approach.
- Non-poaching covenants – states the ex-employee cannot poach your staff.
Restrictive covenants can provide you, as an employer, with a significant amount of protection. To ensure the clause/s you rely on are enforceable, however, speak to one of our Employment Law Solicitors who can provide you with expert advice in a helpful and friendly manner.
Get legal assistance from LawBite
Confused about restrictive covenants? LawBite lawyers are ready to help.
Our expert lawyers can help with both the drafting of new agreements through our contract review
service and the review of existing ones;
We believe that great legal advice is a fundamental business right. We are committed to providing your business with expert legal advice that is:
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