Restrictive Covenants

Restrictive Covenants Guidance At Tinsdills

Restrictive covenants, particularly post-termination restrictions, form an important part of many contracts of employment, especially in respect of those contracts of employment relating to senior or important members of staff.

Restrictive Covenants Experts

Restrictive covenants, including non-compete and non-solicitation clauses, generally aim to protect the interests, goodwill and confidential information of the employer and are therefore of the utmost importance to any business.

During the course of employment, an employee will be under various implied obligations to their employee including a duty to act in good faith (the duty of fidelity) and an obligation not to misuse confidential information. As a result, employees will be severely restricted in any activities that may be seen as competing with their employer whilst they are employed by them. However, once that individual’s employment has terminated, those implied obligations become significantly more limited and, in the absence of any express post-termination restriction, the employee will be entitled to, for example, compete with their former employer or use their employer’s confidential information (not amounting to trade secrets).

It is therefore vitally important to the goodwill of your business that, particularly in relation to more senior employees and those employees having access to sensitive business information, you seek to restrict the post-termination activities of your employees through appropriately drafted restrictive covenants. However, caution should be taken not to draft such provisions too widely or too onerously as, if restrictive covenants are found to unreasonably restrict the former employee’s ability to work, an employment tribunal could deem them unenforceable.

At Tinsdills, our team of specialist employment solicitors can assist your business in preparing contracts of employment which contain restrictive covenants appropriate to the nature and seniority of the employee’s role to mitigate the risk of such provisions being found to be unenforceable by a tribunal.

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    The answer will depend on whether that former employee’s contract of employment contained post-termination restrictive covenants and, if it did, whether those restrictive covenants were reasonably and carefully drafted (and any restricted time periods have not expired). The first thing to do if you believe a former employee is breaching a non-compete clause contained in their contract of employment is to check the validity and likely enforceability of that non-compete with a specialist employment solicitor. Provided the non-compete is well-drafted, it may be advised that you issue a letter to the employee (and, possibly, the new employer) informing them of their non-compete obligations and asking them to cease breaching their post-termination restrictive covenants.

    Unfortunately, there is no steadfast rule when it comes to reasonable restrictive periods and it will depend on the nature of the business and the specific job role that the former employee was employed to do. Often though, a period of between six and twelve months will be used (although a longer period may sometimes be reasonable, for example where the employee was a director of the business).

    If a former employee is in breach of their post-termination restrictive covenants, you may be able to make a claim against them for breach of contract. However, it is likely to be difficult to put a value on such a claim as the loss to your business may be hard to quantify. Instead, it is likely to be important to seek an injunction against the former employee to prevent them from continuing to breach their restrictive covenants.

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