Restrictive covenants are essentially additional clauses contained within the employment contract, but relate specifically to what happens after employment has ended. They tend to be used to restrict the activities of employees who may otherwise use confidential information gained within the course of their employment for the benefit of their new employer or for their own purposes and, in doing so, may damage the business of their old employer. Restrictive covenants are generally used to restrict some or all of:
- an employee joining a direct competitor
- an employee starting their own business in competition (or assisting someone else to do so), sometimes within a particular geography
- poaching staff, customers or investors
- an employee using the employers intellectual property or confidential information in a way that causes harm to the employer
- an employee joining a breakout group of employees who set up in competition
- an employee holding themselves out to be connected with the employer after their termination date.
To be enforceable restrictive terms may only apply for a limited period after termination, normally 3 – 12 months. If restrictive covenants are to be introduced to existing employee’s contracts (where no previous such terms existed) it is important that the employee agrees to the new terms and accepts a payment in consideration of the new terms. The payment offered should be realistic for the extra protections the employer gains – the days of “in consideration of the sum of £1…..” are long gone!
While we do have standard post employment covenants within our ‘off the shelf’ employment contracts, we find in practice that most covenants need to be very specific to be enforceable. We will work with those of our clients whose businesses require post employment covenants to define appropriate clauses.
Often disputes (which can be very expensive – i.e. requiring an injunction from the High Court) can be avoided by reminding employees of their post employment obligations soon after learning of their intention to resign.
Typical employment law pitfalls
Standard or poorly drafted clauses may not provide the levels of protection desired. Clauses that are too wide in scope, too long or too unreasonable in requirement will be regarded as invalid.
Help and support
If you tell us about an employee with post employment covenants resigning, we will normally draft a letter for you informing them of your expectations & their obligations under their contract.
Call myHRdept on 01628 820515 to discuss your employment contract options or contact us to discuss your requirements.