To have any real chance of getting an outgoing employee to comply with the restrictions or a court to enforce them – they must be drafted carefully and tailored to your business.
For these clauses to hold up legally, they must be:
Post-Termination
Restrictions
They protect an employer’s confidential information, client relationships, goodwill, and workforce stability by restricting certain employee actions after they leave the business.
These restrictions may prevent a former employee from:
Soliciting customers, clients, suppliers, or staff
Competing with their former employer for a set period
Misusing confidential business information
Why Have Post-Termination Restrictive Covenants?
Departing employees are often well-placed to take advantage of confidential information, strategic plans, customer and client details or other information about their employer’s business, after the termination of their employment. They may attempt to use this information for the benefit of their new employer, or in order to set up a rival business. This can seriously harm the former employer’s business. Express restrictions, on the other hand:
- Can be specifically designed to reflect the parties’ circumstances.
- Can limit the employee’s conduct and prevent them from damaging the former employer’s business.
- Might deter employees from joining competitors.
- Might deter potential new employers, who face the risk that the restrictions will be enforced by the courts, and may themselves be vulnerable to certain claims, such as inducing a breach of contract, or unlawful means conspiracy.
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).
How the Courts Enforce Them
In most cases, a well-drafted letter before action is enough to stop breaches without formal litigation. However, if court proceedings are necessary, judges apply several key principles when deciding whether a covenant is enforceable
Reasonableness
Post-termination restraints are enforceable if they are reasonable, having regard to the interests of the parties and the public interest.
Legitimate 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.
Special treatment for employment covenants
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.
Preventing competition must not be an end in itself
Restrictive covenants having the sole aim of preventing competition are never upheld by the court.
Restrictions must be no wider than necessary
For any covenant in restraint of trade to be treated as reasonable in the interests of the parties.
Drafting Post-Termination Restrictions
01.
Carefully drafted to reflect the role and risk level of the employee
02.
Specific and proportionate to your business interests
03.
Regularly reviewed to remain valid as the employee’s role evolves
We regularly draft and review restrictive covenants that have been tested and upheld in court. Our solicitors can help you ensure your contracts protect your business and reduce the risk of costly disputes.
TESTIMONIAL
