They protect an employer’s confidential information, client relationships, goodwill, and workforce stability by restricting certain employee actions after they leave the business.
Why Have Post-Termination Restrictive Covenants?
Although employees must observe certain terms that are implied into every contract of employment,  these are of a limited nature and do not generally extend to the period after termination of the contract (except in relation to trade secrets).
Court proceedings are rare, employers typically start with a letter reminding you of your obligations, or request undertakings (formal promises) confirming compliance and disclosing any breach. However, if proceedings are issued, the financial consequences can be severe. Courts will then apply the following key principles when assessing post-termination restrictive covenants:
Post-termination restraints are enforceable if they are reasonable, having regard to the interests of the parties and the public interest.
To be enforceable, a restrictive covenant must be designed to protect a legitimate proprietary interest of the employer for which the restraint is reasonably necessary. Legitimate interests include an employer’s trade connections with customers or suppliers, confidential information and maintaining the stability of the workforce.
Restrictive covenants in employment contracts are generally viewed more strictly than those in commercial contracts, such as those between a seller and a buyer. They are usually less likely to be regarded as reasonable, because of the inequality of bargaining positions between employer and employee.
Restrictive covenants having the sole aim of preventing competition are never upheld by the court.
For any covenant in restraint of trade to be treated as reasonable in the interests of the parties.
You should seek urgent advice and usually it is best to respond as a failure to do so may result in the employer taking legal proceedings which can have significant financial consequences.
We can help prepare your response and deal with any claim should it ensue. We can also assess the enforceability of the restrictions and whether you are in breach. From experience positively engaging with the employer can reap a swift resolution.
If you have any concerns over your restrictions or have received a letter from your employer regarding a potential breach or a claim and are unsure of your next steps please contact our specialist employment solicitors for a confidential and no obligation discussion on.
