Restrictive covenants

Restrictive covenants

Confidential information and knowledge of the business such as the identity of clients, client data, suppliers, workforce know-how and material concerning business strategy may be developed by employees during their time in an organisation.

Employers commonly anticipate that employees may seek to use this information after their employment has ended, either in setting up their own venture or to bring this information and knowledge to the table for a new employer, who may be a competitor.

To safeguard their businesses from such threats, many employers incorporate post-termination restrictive covenants into employment contracts. The standard post-termination restriction clauses which an employer may include to protect its key business interests are those relating to confidentiality, non-solicitation, non-dealing, non-competing and non-poaching.

Whether these restrictions are enforceable, or not, generally depends on a balance between the right of employers to protect their business and the right of employees to use their talent in business post-termination.

In determining whether such a clause is binding, a court would review the following:

  • Is the clause reasonably limited in time?
  • Is the restriction reasonably limited in geography?
  • Does the clause go further than is necessary to protect a legitimate business interest, i.e. client relationships, trade secrets or protecting the workforce?

If you are concerned about the restrictions currently included within your employment contracts, our employment team can review the terms to advise as to likely enforceability. Our team can also assist in drafting new, bespoke restrictive covenants for your business needs, if your company is not currently best protected.