A Guide on Restrictive Covenants in Employment Contracts

When starting a new role, an agreement is reached between the employer and employee setting out the terms of employment. This may be amended throughout the course of employment with the agreement of both parties. Restrictive covenants in employment contracts are a commonplace part of these agreements.

What are restrictive covenants in employment?

A restrictive covenant is a clause in a contract that will prevent an employee from doing something, usually sharing confidential information or competing with their employer for a set notice period after their employment ends. Contracts of employment that contain restrictive covenants are often given to senior employees due to the sway they may hold within an organisation.

Are employment restrictive covenants enforceable?

Broadly, restrictive covenants are enforceable if they are properly phrased and implemented into a contract. However, they can be disputed if an employee feels they are unjustified, and some are harder to enforce than others. For example, a non-compete covenant is much harder to enforce than a non-solicitation clause due to the level of restrictions placed on the former employee. The test for the court is if the restrictive covenant will ‘protect a legitimate business interest’, then it may be enforced.

Types of restrictive covenants

The types of restrictive covenants in employment law include:

• Non-solicitation – Preventing an employee from persuading clients to move their business to their new employer, or to themselves on a freelance basis.
• Non-dealing – Preventing an employee from working with clients of their former employer in any kind of competing role.
• Non-poaching – Preventing an employee from approaching former clients to join a new business.
• Non-employment – Preventing an employee from being involved in the recruitment of their former colleagues.
• Non-compete – The most extreme of the restrictions, which prevent an employee from joining a business that competes with their former employer in any way.

It is highly recommended to seek legal advice upon leaving a role in which you are subject to restrictive covenants to ensure that you are fully aware of the restrictions placed upon you and, if you would like to violate them, how likely you may be to succeed in a tribunal. Contact us to find out how we can help you.