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Restrictive Covenants

restrictive covenantsRestrictive covenants, sometimes known as post termination restrictions, prevent employees from doing certain things after their employment has ended.

Restrictions on using the employer’s confidential information or intellectual property are common. Other frequently used clauses prevent employees from poaching customers, suppliers and colleagues and might even ban working for any competitor or setting up a competing business.

If you need advice or assistance in relation to a restrictice covenant book an initial consultation with one of our experienced Employment Law Solicitors by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or by completing our Free Online Enquiry Form.

How can Elite Law help with restrictive covenants?

We usually advise in one of three situations:

  • You are offered a Contract of Employment from a new employer that contains restrictive covenants and want advice about whether or not they are fair to you
  • You have been offered another job or are about to leave your employer, and want advice about whether the restrictive covenants prevent you taking up new employment or setting up your own business
  • You have received a letter from your ex-employer threatening litigation because you have allegedly breached your restrictive covenants

What is a non-solicitation clause?

Non-solicitation clauses prevent attempts to entice customers, clients, suppliers and/or colleagues to move with you to a new employer or new business.

What is a non-dealing clause?

Non-dealing clauses go further than non-solicitation clauses and prevent any business dealings with customers or clients at the new employer or new business. This removes the need for your current employer to prove that you initiated the move.

What is a non-compete clause?

Non-compete clauses prevent you working for or setting up in business as a competitor of your employer.

Are restrictive covenants enforceable?

Restrictive covenants in Contracts of Employment are enforceable only if they are reasonably necessary to protect a legitimate interest. Trade connections with clients, customers and suppliers, confidentiality and a stable workforce are all generally considered to be legitimate interests. The test then becomes whether and what type of restrictive covenants are reasonably necessary to protect these interests. 

Generally, the lesser the impact on the employee, the easier it is to persuade a court that the restrictions are reasonably necessary – so a non-solicitation clause is more likely to be enforced than a non-dealing clause. Non-compete clauses are the hardest to enforce, because restricting competition per se is not considered a legitimate interest. However, they may be appropriate if they are the only way to stop the employee gaining an unfair advantage by exploiting their former employer’s confidential information or customer connections.

It is common to see a variety of separate restrictions, i.e. non-solicitation, non-dealing and perhaps even non-compete clauses set out in a Contract of Employment. This is the employer hedging its bets by including backstop non-solicitation and/or non-dealing clauses in the event that more restrictive clauses are found not to be enforceable.

How long can restrictive covenants last?

Part of the assessment as to whether or not a restrictive covenant is reasonably necessary to protect a legitimate interest is the length of the restriction. The longer the period of time has elapsed since the employment terminated, the less competitive advantage the employee might have in approaching a customer or setting up a competing business. What is reasonably necessary will depend on the particular circumstances: the industry sector, the role and the influence the employee might have over clients, customers, suppliers and employees.

For how long can my employer prevent me from working for a competitor?

Non-compete clauses are much more restrictive than non-solicitation clauses and non-dealing clauses and so are generally shorter in duration in order to meet the test of being reasonably necessary.

In May 2023, the government announced an intention to introduce a statutory cap of 3 months for non-compete clauses in Contracts of Employment. However, there is currently no timeframe for the introduction of this legislation. Until then, each clause will need to be examined to assess whether it is indeed reasonably necessary to have a restriction of that length.

What are the risks invovled in ignoring a restrictive covenant?

Some employers include restrictive covenants as a deterrent without ever intending to enforce them. Others might receive advice that enforcement is expensive, so only worthwhile if you can do serious damage to their business by acting in breach of the restriction.

However, some employers take a firm line by enforcing restrictive covenants, particularly if they are concerned they will lose business or valuable employees to a competitor. They may also contact your new employer, who might be brought into the dispute accused of aiding or encouraging you to breach your restrictive covenants.

Ultimately, whether or not a covenant can be enforced can only be determined by a court at the end of expensive litigation. Whether or not you succeed in arguing that the covenants go further than reasonably necessary, you are likely to be left with a large legal bill if your employer takes you to court.

What can I do if my former employer threatens to take me to court for breaching my restrictive covenants?

The first step is an assessment of whether or not the covenant is likely to be enforceable. We can help you assess the risks of your former employer succeeding at court.

In most cases, it is possible to negotiate with your former employer. “Undertakings” are promises not to do certain things and can be offered as an alternative to court. We can help you assess whether the undertakings are appropriate, and to propose alternatives if not.

How Elite Law Solicitors can help

As explained above, our experienced Employment Law Solicitors can advise in one of three situations:

  • You are offered a Contract of Employment from a new employer that contains restrictive covenants and want advice about whether or not they are fair to you
  • You have been offered another job or are about to leave your employer, and want advice about whether the restrictive covenants prevent you taking up new employment or setting up your own business
  • You have received a letter from your ex-employer threatening litigation because you have allegedly breached your restrictive covenants

If you are seeking specialist legal advice or assistance in relation to a restrictice covenant book an initial consultation with one of our experienced Employment Law Solicitors by calling 0800 086 2929, emailing info@elitelawsolicitors.co.uk or by completing our Free Online Enquiry Form.

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