Employment Contracts:  enforcing Restrictive Covenants

What is a Restrictive Covenant?

Restrictive Covenants restrict what an employee can or cannot do once they leave a business and therefore helps your business protect its legitimate business interests.

Having such clauses within employment contracts of senior or highly skilled employees can deter them from joining competitors and using the skill, knowledge, and information they acquired at your business, in competition with you. Similarly, you may choose to include such restrictive covenants in any post termination settlement agreement with your former employee. 

The nature and type of restrictive covenant should depend on the necessity for your business. The covenant should be reasonable both geographically and by timescale. Should your restrictive covenant be too wide or unreasonable it will not be enforceable.

Different Types of Restrictive Covenant

There are a variety of restrictive covenants you may want to implement:

• Non - solicitation clauses – restricts the former employee from actively contacting your customers/ clients with whom they have had recent dealings. Potential customers can also be included in such clauses, however the evidence to support the enforceability of such a clause would be difficult.

• Non - poaching clauses – restricts the former employee from poaching or employing other members of your staff.

• Non - competition clauses – restricts the former employee from in working for/ setting up a similar business/ business in competition with yours.

• Non – dealing clauses – restricts the former employee from dealing with/ working with either former supplier/ clients/ customers.

 

The likelihood of enforcing the above clauses depends firstly on how stringently the clauses are drafted to protect your legitimate business interest and secondly whether they are drafted within an employment contract or a settlement agreement.

Assuming the clauses as drafted are reasonable and do not go beyond protecting your legitimate business interest, you would be able to enforce any breaches against the former employees. A number of remedies are available to you dependant on the nature of the breach and damage to your business interest. Remedies can include undertakings, injunctions, damages etc.

Please contact us for more advice on restrictive covenants.

If you require assistance in incorporating such restrictive covenants into your employment contracts or settlement agreements, please contact our employment team:

Vaishali Thakerar, Director and Employment Solicitor
Lawson West Solicitors, Leicester

If on the other hand you require advice on how to enforce your restrictive covenants against any breaches by former employees, please contact our dispute resolution team:

Madhvi Panchal, Solicitor, Dispute Resolution
Lawson West Solicitors, Leicester

 

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