You may have post termination restrictive covenants written into your contract of employment. These may seek to restrict your ability to work in competition with your employer after you leave them. However not every restrictive covenant is enforceable in every situation.
Introduction
In the course of undertaking your role, you may have acquired confidential information relating to your employer’s business. This could include business tactics and strategy, pricing and customer or client information. You may also have influence over other members of staff, particularly if you are in a more senior position. Your employer may be concerned that you will use that knowledge or influence for the benefit of a competing employer once you leave. Your employer may therefore set out conditions on when and where you can work once your employment is terminated or you resign.
In general, any term restricting your activities after the employment relationship is ended is void for being in restraint of trade and contrary to public policy unless your employer can show that:
- It has a legitimate proprietary interest that it is appropriate to protect;
- The protection sought is no more than is reasonable having regard to the interests of the parties and the public interest.
Legitimate interests include your employer’s trade secrets or confidential information, their connections with clients and the stability of their workforce.
What are the different types of post-termination restriction?
Your employer might use different types of restrictions to protect its interest:
- Non-Solicitation Clause – to prevent you from approaching your employer’s customers or clients with a view to doing business with them.
- Non-Dealing Clause – to prevent you from dealing with your employer’s customers or clients who have come to you for your services, even where you have not encouraged them to approach you.
- Non-Compete Clause – to prevent you from working for a competitor in a competing capacity or setting up a new business in competition.
- Non-Poaching Clause – to prevent you taking your employer’s staff to your new business.
- Confidentiality Clause – to prevent you from disclosing your employer’s trade secrets or confidential information.
What is enforceable?
It depends upon the individual circumstances. Just because you have a contractual restrictive covenant does not mean that it is enforceable. If a restrictive covenant is too wide or too generic for example, it is unlikely to be enforceable. In considering whether a covenant is reasonable a Court would look at:
- The time limit on the restrictions;
- The geographical restrictions;
- Whether the restriction goes further than necessary to protect a legitimate business interest.
The Court can decide to remove sections of a covenant which would have prevented it from being enforceable. However, the Court will not rewrite a covenant to make it enforceable.
It is also worth noting that your employer will not be able to enforce your restrictive covenants if they have committed a serious breach of contract.
What action can my employer take to enforce the restrictive covenants?
Your employer can apply for an injunction to prevent you from breaching the restrictive covenants. If they are successful, you may be prevented from working for the new business and may also have to pay your former employer’s legal costs as well as your own. In addition, if your employer has suffered financial loss, they may sue you for compensation to cover those losses.
How can Lincs Law Employment Solicitors help?
In view of the potentially serious consequences of breaching a restrictive covenant it is important that you get specialist advice on your own post termination restrictions. If you would like specific advice please contact on 01522 440512 or visit our website at www.lincslaw.co.uk for more details on how we can help you.
Kathryn Bolton
Specialist Employment Law Solicitor
Lincs Law Employment Solicitors
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