Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

In this post we’ll take our first in-depth look at restrictive covenants in employment law – from an employer’s point of view. We’ll look in our next post at restrictive covenants from an employee’s point of view.

  1. What are restrictive covenants?
  2. What are restrictive covenants useful for?
  3. What problems can restrictive covenants cause?
  4. How can you ensure that the restrictive covenant is valid?

What are restrictive covenants?

Restrictive covenants are contained in (or annexed to) contracts of employment. They are a promise not to engage in certain conduct after they’ve left employment. So, why are they used only after the contract is terminated? The reason why they’re used only after the employee moves on is that during their employment they’re subject to the implied terms of the contract – including, for example, a duty of loyalty towards their employer. This prevents the employee from doing things such as breaching confidentiality or setting up in competition. However, this duty falls away once the employee leaves their employment. Restrictive covenants are therefore used to “bind” the employee after they leave.

An example of a restrictive covenant (we’ll cover the various types in a future post) is a “non-compete clause” where the employee agrees – after the termination of their employment – not to set up in competition with their employer for a limited period of time (i.e. up to 6 months after termination) and for a limited geographical area (i.e. London or the whole of the UK).

What are restrictive covenants useful for?

Ex-employees (particularly those in positions of seniority and responsibility such as managers or directors) have access to a great deal of the resources and talent of their employer. This could potentially be used illicitly by an employee to gain an advantage over their employer when they leave their job. Restrictive covenants prevent ex-employees from (among other things) immediately setting up in competition, revealing certain confidential information to competitors or poaching clients, customers, suppliers or employees of their former employer. This is obviously preferable to their employer and is why restrictive covenants are used on a frequent basis in contracts of employment – even if the employee isn’t privy to important clients or information at the time they sign the contract.

What problems can restrictive covenants cause?

After the termination of the contract of employment it is in the public interest that individuals are free to choose how they utilise the skills and knowledge they’ve learned whilst being in employment. Restrictive covenants are therefore prima facie void and unenforceable as they are in restraint of trade – they seek to stop the individual from using those skills and knowledge. However, if the employer can show that the restrictive covenant satisfies the following tests then it can be used:

  1. The employer has a legitimate proprietary interest that requires protection; and
  2. The protection sought is no more than is reasonable, having regard to the parties’ and the public’s interest

How can you ensure that the restrictive covenant is valid?

The employer will normally have a legitimate proprietary interest that requires protection – their business interest. The key issue is “reasonableness” – the covenant must be reasonable with regards to the nature of the activities it prohibits, the geographical scope of the restrictions, and the duration of the limitation imposed. An example of an unreasonable covenant would be one that sought, for example, to restrict the employee from engaging in a particular act for a year or more – unless, that is, extreme circumstances apply (such as the employee has had access to particularly confidential information or they work in a particularly sensitive industry).

logo_website

About

Redmans Employment Team deal with employment matters for both employers and employees, including drafting employment contracts and policies, advising employers and employees on compromise agreements, handling day-to-day HR issues, advising on restructures, and handling Employment Tribunal cases for both employers and employees Call 020 3397 3603 to speak to one of the members of our employment team or email us on enquiries@redmans.co.uk. Redmans have offices in Richmond, Chiswick, Hammersmith, Fulham, Kingston, Wimbledon, Ealing, Kings Cross and Marylebone (meetings strictly by appointment only).

Want to talk to an expert employment law solicitor?

You'll receive a callback from a specialist within an hour

Share →

Our awards

Request a callback

    Your first name (required)

    Your last name (required)

    Your email (required)

    Your telephone number (required)

    Brief details of your enquiry

    Testimonials

    4.80 Average

    292 Reviews

    Anonymous

    Exceeded my expectations. Very professional and proactive. I highly recommend them.

    Posted 1 week ago

    Anonymous

    The service provided to me by Redmans Solicitors was excellent and I would have no hesitation in recommending Chris. While I cannot get into the detail of the matter, it was very emotionally difficult for me and Chris was sensitive throughout and was clear that his motivation was arriving at a solution that helped me while I am unwell - and less about his own fee. His emotional intelligence was coupled with a very sharp and quick understanding of the complex facts of the matter and the legal arguments and he quickly formed a strong case working with me the whole way. Chris was particularly patient with me at what I found a stressful time, and I want to thank him personally for everything he did.

    Posted 1 week ago

    Anonymous

    A lovely, friendly and professional service. They advised me through my employment change. They where very responsive, keeping me updated and explaining everything in layman’s terms. No hidden charges. I would highly recommend them.

    Posted 2 weeks ago

    Philip H

    I was advised well and had a good experience using Redmans Solicitors.

    Posted 2 weeks ago

    Line v

    Good service and very helpful, informative

    Posted 2 weeks ago

    Katarzyna Z

    Very prompt replies, good rates and competent staff.

    Posted 2 weeks ago

    Sudhir S

    Professional in approach and give good advice all the time during my settlement agreement with the Company. Fee wise slightly expensive compare to the initial estimates.

    Posted 2 weeks ago

    Aaron H

    Very grateful to Mel who was brilliant kept me informed and was really helpful when I needed her

    Posted 2 weeks ago

    Alexia P

    The team at Redmans we're always professional and helpful throughout my case. The team were open to listening to me, understanding my situation and being clear about what they can support with.

    Posted 2 weeks ago

    Emma L

    So glad I chose Redmans to assist with my emplyment issue. From start to finish I received excellent service. Mel Chin had calm, methodical approach and she got me a far better result than I could have done on my own. Would not hesitate recommend far and wide.

    Posted 3 weeks ago

    Sam T

    I was extremely impressed with the support and advice that I received. The solicitors I worked with acted very quickly and were clear in their communications at every stage.

    Posted 3 weeks ago

    Anonymous

    I cannot thank Caroline enough for her empathetic help, advice and guidance in what was at times a very stressful situation. Always professional and available to answer any queries I had, I highly recommend Caroline and all the team at Redmans.

    Posted 3 weeks ago

    Robert M

    Chris Hadrill provided me with very efficient turn around of an employment offer from a US-based company. Chris reviewed the contract, identified key issues and offered sound/pragmatic advice and suggestions for improvement which I could then bring in non-legalese to my prospective employer. Employer accepted all the important changes Chris suggested and I accepted the job!! Very satisfied with the service.

    Posted 3 weeks ago

    Karen R

    Prompt, helpful and excellent service. Very professional and super quick. Very reasonable price for London. Definitely recommend and would use again.

    Posted 3 weeks ago

    Anonymous

    Excellent service from Redmans, I would not hesitate to recommend this firm of solicitors. Thank you very much to the team, and especially Chris and Mel!

    Posted 1 month ago

    Siriana B

    Thorough, efficient, and always available to answer my queries. It was a pleasure to deal with.Thanks

    Posted 1 month ago

    Anonymous

    Excellent speedy service

    Posted 1 month ago

    Robert

    Excellent service, very professional. would definitely use again.

    Posted 1 month ago

    Mary B

    I was very happy with the work Chris did for me. I believe with his help I secured a more favourable outcome both financially and in terms of clauses contained in the legal agreement I ultimately signed. I had utmost trust and confidence in the advice Chris provided throughout. Chris kept me informed at every stage and I found him very efficient at bringing matters to a conclusion without unnecessary delay.

    Posted 1 month ago

    Mark M

    I found Redmans very easy to work with. Mel was very responsive, her advice led to an improved settlement. . Recommended.!

    Posted 1 month ago

    Anonymous

    Fantastic service. I would recommend Redmans to anyone who needed a Solicitor. The communication was second to none and consistent clear guidance was given.

    Posted 1 month ago