Post Termination Restrictive Covenants
Post termination restrictive covenants are often written into an employee’s contract of employment to restrict the employee’s ability to work in competition with the former employer after they leave. However not every restrictive covenant is enforceable in every situation. Read on for more information.
You may be in possession of confidential information, business tactics, customer information or have influence over other members of staff. 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.
Types of Post-Termination Restriction
Your employer might use different types of restrictions to protect its interest as follows:
- Non-Solicitation Clause – this seeks to prevent you from approaching your employer’s customers or clients with a view to doing business with them.
- Non-Dealing Clause – this seeks 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 – this seeks to prevent you from working for a competitor in a competing capacity or setting up a new business in competition.
- Non-Poaching Clause – seeks to prevent you taking your employer’s staff to your new business.
- Confidentiality Clause – prevents you from disclosing your employer’s trade secrets or confidential information.
What is enforceable?
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. However, whether a restrictive covenant is enforceable depends upon the individual circumstances. 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.
Sometimes the Court might remove sections of a covenant which would have prevented it from being enforceable, but the Court will not rewrite the 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.
How are restrictive covenants enforced?
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 the 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 LincsLaw 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 us on 01522 440512 or 01522 440515 (direct dial) or visit our website at www.lincslaw.co.uk.
Specialist Employment Solicitor
Lincs Law Employment Solicitors