What is a restrictive covenant in an employment contract?

Restrictive covenants are often contained in your contract of employment, but they can also be found in policy documents, share rules or elsewhere. Their purpose is to restrict what you can do for a certain period following termination of your employment.

While it's perfectly acceptable in law for a restrictive covenant to be added to an employment contract, it may be unenforceable, on the grounds that it amounts to a restraint of trade.

However, if your employer can show that the restrictive covenant is only in place to protect their legitimate commercial interests, and that it only extends far enough to reasonably protect those interests, a court may rule in its favour, with potentially ruinously expensive damages and an injunction for the employee a distinct possibility.

That's why you should always speak to an experienced restrictive covenants solicitor before signing a contract which includes a restrictive covenant, or potentially breaking one.

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What are the different types of restrictive covenant?

Restrictive covenants are designed to protect your employer’s legitimate business interests when you leave their company. For this reason, most fall broadly into one of three categories:

• Non-competition: these restrictive covenants aim to prevent you from working for a direct competitor for a certain period, often around 6 months though it could be longer depending upon your seniority.
• Non-poaching: these clauses are designed to prevent you from poaching current members of staff from the business.
• Non-solicitation: the aim of a non-solicitation restriction is to prevent you from contacting clients of the business for a certain period after leaving the business

Are restrictive covenants enforceable in employment?

Generally, clauses contained within a contract of employment which attempt to restrict your right to compete are unenforceable because they're viewed as unlawful restraints of trade. An employer may, enforce a post termination restriction which is drafted in a manner that is designed to go no further than reasonably necessary to protect the employer's legitimate business interests. Legitimate business interests which an employer is entitled to protect by way of post termination restrictions include:

• The employer's trade secrets or confidential information
• An employer's connections with clients
• The stability of the employer's workforce

In assessing whether a clause is enforceable, the court will consider the following:

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

You should always speak to an experienced employment law solicitor before signing or potentially breaching an employment contract containing a restrictive covenant. Call us on 0330 041 5869 or contact us online and we'll call you back.

How can our restrictive covenants solicitors help?

It can often be tough to understand the full extent of how a restrictive covenant can affect your contract and the terms of your departure should you wish to move on to a new role elsewhere. Our experienced restrictive covenant solicitors can support you at any stage of the process, including:

• Reviewing your contract and helping you to negotiate for better terms
• Helping to assess your options if you wish to leave the company for a new role, or to set up a new business, without breaching the terms of a restrictive covenant
• Supporting you where a previous employer claims a breach of a restrictive covenant
• Negotiating a waiver of restrictive covenants if your employment has been ended through no fault of your own, such as redundancy

Why choose Slater and Gordon’s restrictive covenants solicitors?

While employment contracts can seem simple on the face of it, issues like restrictive covenants can cause complications. Whether you want to understand the implications of a restrictive covenant in a contract you’ve already signed or wish to negotiate more favourable terms before you accept a new position, our expert restrictive covenant solicitors are here to help.

Our friendly and compassionate employment team have an outstanding track record of success in employment contract cases, and many of our solicitors have received recognition from esteemed legal publications such as Chambers and Partners and the Legal 500. With a wealth of experience and expertise, you can trust that you are in good hands.