UK Employment Law\ Employer \ Retrictive Covenants
Restrictive Covenants
Your employer can write into your contract so-called ‘post-termination obligations’. These terms relate to occasions where you agree not to do certain things after you leave (restrictive covenants). The purpose of them is to protect the employer’s business, stopping someone immediately going to work with a direct competitor (for example).
They usually fall into the following categories:
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non-compete covenants. these prevent an ex-employee from working for a direct competitor, usually within a specific geographical area, for a set time period;
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non-solicitation/non-dealing covenants: these prevent ex-employees entering into working relationships with former customers;
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non-poaching of employees: these prevent ex-employees recruiting former colleagues for a set period after the contract is terminated;
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restrictions on using confidential information. This is usually laid out in a list of examples.
How they work for employers
Employers must remember that ‘restrictive covenants’ should go no further than is deemed reasonably necessary to protect their business. However, it can sometimes be difficult to define what is “reasonable” and a “legitimate business interest”.
Geographical restrictions can depend heavily on the profession. A fifteen mile limit might be enforceable for a barber in a rural community, but the same restriction would cause problems if placed on a solicitor in a city.
Anti-poaching restrictions can also cause problems. It could be deemed legitimate to prevent a sales manager recruiting from his former team for a period after his employment ends. This might not be the case, however, if the restriction meant ‘all employees’. Bosses might find it legally problematic arguing the restriction was reasonable.
Covenants can work to protect an employer’s business, providing leverage even if a boss would rather not pursue a matter through the courts. They can become a key element in negotiations for terminating a worker’s employment. The covenant terms can be posted to the ex-employee’s new company. Such an action can advise the new employer about possible breaches and could lead to a claim of “inducing a breach of contract”.
How they work for employees
Restrictive covenants are laid down to deny someone the chance to work in a profession in which they are experienced. It is not something that would ever be taken lightly by the courts. Therefore, such agreements seeking to lay down a restrictive set of working rules are rarely enforced.
It is also worth noting that employers who terminate a contract by failing to follow disciplinary procedures or by not giving the period of notice laid down in the contract, then make the covenants unenforceable.
An employer may offer money in-lieu of notice, but this does not mean any covenant is made more enforceable because of such an action. This is the case especially where there are no express rights to make such payments under the employment contract.
The situation is different when employees quit on their own accord. It is still the case, however, that the covenants have to be reasonable. A covenant stopping an employee from selling to former customers is more likely to be enforceable than one which stops them contacting former customers.
In all of these occasions, it is best to seek the help of a solicitor because there are no hard and fast rules.
