Restrictive Covenants

A restrictive covenant is a clause (or set of clauses) in an Employment Contract or Director Service Agreement which restricts the actions of an individual on termination of employment.

These clauses are used to protect an employer’s commercial interests as departing employees who are looking to join a competitor or indeed set up on their own, have acquired an insight and knowledge into confidential business matters and this could give them an unfair competitive edge.

The most commonly used restrictive covenants are known as non-competition and non-solicitation covenants.  Examples of these are:

• Restrictions on working for competitors in the same industry for a defined period and within a defined geographical area
• Restrictions on approaching or seeking business from existing clients of your business
• Restrictions on an employee dealing with your clients even if they approach him/her
• Covenants preventing your employee from recruiting (poaching) other employees from your business.

It is essential that an employer considers the reasonableness and justification of any restrictive covenants to avoid them later being found unenforceable by a court.  Clauses that are too widely drafted in relation to restrictions are likely to be unenforceable such as restricting an employee from working for a competitor for 3 years within a wide area would generally be considered a restraint of trade and therefore the employee may challenge its validity.

Our specialist employment solicitors can help:

• Draft employment contracts with appropriate restrictive covenants, including a gardening leave clause if appropriate.
• If an ex-employee is in clear breach of the contract, we can explain your options, including applying for an injunction or pursuing a breach of contract damages claim.

Whether you are an employer or an employee, if you require further information on restrictive covenants, please contact Lisa Aitken who has a wealth of information in this area of employment law on 01926 491181 or email: LisaA@moore-tibbits.co.uk.