Is a Restrictive Covenant Preventing You from Changing Jobs?

18 January 2017

Employers often insert clauses into an employee’s contract of employment which have an impact on the employee when they leave the business, these are called Restrictive Covenants. Commonly, the more senior or specialist the employee’s role or company, the more likely that Restrictive Covenant clauses will be included in an employment contract.

Restrictive Covenant clauses are also known as Post-Termination Restrictions and if breached your employer may be able to enforce them in Court. The most common types of these clauses found in employment contracts are:

Non-Solicitation Clause – A non-solicitation of customer’s clause is to prevent an ex-employee from approaching any of their former employers’ clients or potential clients.

Non-Dealing Clause – A non-dealing clause is more rigid than a Non-Solicitation clause, as it will prevent the employee from dealing with the employers’ clients even if it is the client who approaches the employee.

Non-Compete Clause – A non-compete clause is to prevent the employee from working for a competitor in a similar role and also from setting up a competing business.

Non-Poaching Clause – A non-poaching clause is to prevent the employee from taking any key employees with them to their new employment or business.

However, in order for a Restrictive Covenant or Post-Termination Restriction clause to be enforceable in English Courts, certain criteria must be met:

  1. The clause must only be enforceable for a set time period. Usually clauses will only be enforceable if they are in place for no longer than 12 months post termination. In very exceptional and specific cases it may be enforceable for over 12 months but the employer will have to justify this to the Court.

  2. The clause must not be too restrictive on you as the employee. This is often a consideration the Court needs to take in respect of Non-Compete clauses, which are described above. This is because a Court would want to ensure that everyone has the right to freely carry on their trade or business provided they do not act unlawfully in doing so. If an employer tries to unreasonably restrict an employee’s ability to follow their trade then that is called a Restraint of Trade and is deemed to be too restrictive.

  3. The employer has to show that the clause is protecting a legitimate business interest. This means the employer would have to show that if the clause was breached, it would have a negative impact on their business. It is therefore for the employer to show that there isn’t a clause in place for no good reason. This is why Restrictive Covenants are more likely to be found in senior employee’s contracts, as they are more likely to have access to sensitive and confidential information or trade secrets.

Therefore, when deciding whether a Restrictive Covenant or Post-Termination Restriction is enforceable, the Courts must balance between the restraint on the employee and the employer’s legitimate business interest.

If a Covenant is found to have been breached, your employer may apply to the Court to enforce the Covenants by way of an Injunction. This can be against you and possibly your new employer. Your employer may also seek to claim their costs and/or damages against you. It is for this reason that Restrictive Covenants must be taken seriously, and you should get specialist legal advice from an Employment Solicitor if you are potentially in breach.

If you then require an Employment Solicitor or Litigation Lawyer to review your contract of employment and provide you with a detailed written report on the reasonableness and enforceability of the Restrictive Covenants or Restrictions, we will agree a fixed fee with you upfront before any work starts.

Once we have provide you with a written quote for the agreed work to be done, that price will not change.

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