Restrictive Covenants
It is usual for employers to insert clauses (especially into their senior employees' contracts) which seek to restrict their conduct post-termination. It is also becoming more and more common for employers to put these into the contracts of junior staff.
Restrictive Covenants commonly seek to prevent you for a set period of time post termination from working for a competitor, poaching clients, contacts and employees away from the company and/or using confidential information learned during the course of your employment.
"Whether such clauses are actually enforceable against the employee will depend upon the particular circumstances of the case."
Clauses
Whether such clauses are actually enforceable against the employee will depend upon the particular circumstances of the case. However, the following basic principles will ordinarily apply:
- The clause must not be any more restrictive on the employee than is reasonably necessary in the particular circumstances to protect the employer's business. If the clause is too restrictive then it is likely to be struck out as unenforceable by the Courts.
- The employer must be able to show that they have legitimate business interest which require protection. They cannot simply seek to restrict an employee competing against them after they have left. They must be able to show that the employee's potential actions could cause a detrimental effect on their business.
- What is reasonable will depend upon the employee's position within the business. For example, it will be more reasonable to seek to restrict the actions of senior employees who are regularly in contact with the customers and contacts of the business than it will be to seek to restrict the actions of the office junior
If you do have restrictive covenants in your contract, your options post-termination can be severely limited. This could leave you unable to start work with a new employer for the period of time set out in the agreement. This is usually six months but is sometimes up to a 12 months.
You may decide to ignore the restrictions when you leave and go and work for the employer of your choice, perhaps taking your clients and contacts with you. You would, however, run the risk of your old employer taking issuing legal proceedings against you to enforce the restrictive covenants. They could seek an injunction restraining both you and your new employer. Court proceedings on restrictive covenants are time-consuming, costly and stressful. Whilst the Court might ultimately find that the restrictive covenants are not enforceable against you (see Restrictive Covenants for more details) Court proceedings should always be avoided if possible.
The best course of action is to negotiate with your employer on the wording of the restrictive covenants now so that you only sign up to something you are happy to be bound by. For example, they might be seeking to restrict you for six months, whereas you would be willing to be restricted for three months post termination. They might wish to prevent you working for any competing employer within a ten-mile radius, whereas you might consider a one-mile radius more reasonable.
At Sykes Anderson we are experienced in negotiating the wording of such clauses in our client's service agreements and are up to date with case law on what is considered reasonable by the Courts. A member of our employment department would be happy to assist you if you require advice or assistance in negotiating a favourable service agreement with your new employer.
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Philip Landau is a solicitor and partner, specialising in employment law, in the London legal firm Landau Zeffertt Weir.