Independent Legal Advice on Restrictions in Employment Contracts - Prolegal

Independent Legal Advice on Restrictions in Employment Contracts

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A restrictive covenant is a clause within a contract of employment that generally has an anti-competitive and restrictive effect. It seeks to restrict an employee from engaging in activities after an employee has left their current employment.

It may also deny an individuals ability to work and make a living in an industry in which they are experienced. For that reason, they are only enforced if they do no more than is necessary to protect the employer’s legitimate business interest.

These business interests could include:

  • Trade secrets.
  • Confidential information.
  • A client base or customer list.
  • Key employees.
  • Supplier relationships.
  • Price lists.
  • Terms and conditions with key suppliers,
  • Salary and other sensitive commercial information.

There are different types of restrictive covenants, but the ones which are generally used within contracts of employment include:

  • Restrictions on working for competitors
  • Restrictions on approaching the employer’s clients or customers.
  • Restrictions which prevent dealing with former clients or customers, regardless of which party made the approach
  • Covenants preventing poaching existing employees.

If the restriction is too onerous or wide reaching, they will not be enforced. Covenants that do not expire after a reasonable time are unlikely to be enforced. Geographical restrictions have been widely used, but are less likely to be relevant where an employer’s customers are geographically spread, such as an internet business.

Whether or not a covenant is enforced will depend on the potential damage done to the business in that employee breaching the covenant. This will depend on the role the employee had and the nature of the covenant. Employees who develop relationships of trust with customers are more likely to have enforceable restrictive covenants.

If an employer breaches the contract of employment before the employee breaches the restrictive covenant, for example, by failing to give due notice under the contract, then the employer will lose their right to enforce the covenants.

Our experienced team of solicitors can

  • Advise you whether the covenants in your contract of employment are likely to be enforced
  • Help negotiate amendments to the covenants before you sign the contract
  • Advise as you leave your employment whether your intentions are likely to breach covenants
  • Advise whether your employer has breached your contract, meaning that covenants cannot be enforced
  • Help with threats of or actual litigation by your employer to enforce restrictive covenants

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