What are post-termination restrictive covenants?
Post-termination restrictive covenants attempt to protect an employer’s business by restricting an employee’s actions after they have left their employment.
Why impose restrictive covenants?
All businesses have certain information which is vital to their success. For example, pricing and quotation structures, business strategies, client and supplier details, business contacts or certain formulas required to manufacture products. This information varies depending on the nature of the business. Some employees will have access to this information when carrying out their day to day activities as an employee. A departing employee may have the opportunity to use this information to the employer’s disadvantage, for example, by using it for the benefit of a new employer or to start up a rival business. Whilst employees are subjected to contractual duties throughout their employment, key obligations may fall away once the employment relationship has ended. Including post-termination restrictive covenants in an employment contract is one way in which an employer can seek to protect its business from its former employees.
Are restrictive covenants enforceable?
A restriction will be enforceable only if it protects legitimate business interests and extends no further than is reasonably necessary to protect those interests. There is often a fine line as to whether covenants are enforceable and it will be dependent upon how the covenant was drafted and the individual facts in each case.
Types of restrictive covenants
The standard types of restrictions which can be used by employers are:
- Non-compete / non-competition covenants restrict the departing employee from working in a competing business, even if they do not approach or deal with the customers of their former employer.
- Non-solicitation covenants restrict the departing employee from soliciting customers or clients of their employer.
- Non-dealing covenants restrict the departing employee from dealing with former customers or clients (regardless of which party approached the other); and
- Non-poaching covenants help to stabilise the workforce by preventing the departing employee from taking colleagues with them.
Remedies for breach of restrictive covenants
If an employer has reason to believe that an employee has breached the post-termination restriction, an employer can seek an order of the court (an injunction) requiring the employee to stop the offending conduct. An employer will also be able to claim damages.
How we can help…
We are specialist employment lawyers and regularly advise both employers and employees on the enforceability of restrictive covenants and the disputes which they can cause. We will help to identify whether the covenant is enforceable, whether it has actually been breached, the most suitable way to assess damages and appropriate steps for you to take. Whilst we vigorously defend our client’s position, we do try, when possible, to resolve matters without the need for court litigation with the aim of saving our client’s time and costs. We have recent experience on advising those in the banking, recruitment, retail, legal, hospitality and pharmaceutical sectors.
If you are an employer who is concerned with the enforceability of your restrictive covenants, we can draft new restrictive covenants that are tailored to protect your business’s particular interests.
For specialist employment law advice on restrictive covenants, please do not hesitate to call us. We are happy to have a free no obligation discussion over the phone to see how we can help and to discuss the options available to you.
If you would like to get in touch with our employment team, please contact us on 020 7234 0200 or email@example.com
Partner, Employment Law
Anthony offers succinct and practical advice to both businesses and individuals on various issues including redundancies, unfair and wrongful dismissals claims, unlawful discrimination, grievance and disciplinary procedures, TUPE, staff handbooks, contracts of employment, restrictive covenants and their enforcement, settlement agreements and the employment aspects of corporate reorganisations or sales. Read more...
Associate, Employment Law
Matthew handles all types of employment matters. He represents and advises employees and employers on issues involving whistleblowing, discrimination, redundancies, unfair and wrongful dismissal, TUPE, Working Time Regulations, restrictive covenants and settlement agreements. Read more...