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 name

Your email

Your telephone number

Contact us

Please feel free to discuss your own position and concerns. Contact your nearest office on:

T: 020 3397 3603
E: enquiries@redmans.co.uk
W: www.redmans.co.uk

Testimonials

4.76 Average

176 Reviews

Mohamed A

Super helpful and efficient, trustworthy service

Posted 13 hours ago

Anonymous

efficient, responsive and effective

Posted 23 hours ago

Andrew B

Very good service

Posted 23 hours ago

Anonymous

Excellent service, compassionate and a good outcome

Posted 2 days ago

Anonymous

I had an employment issue which required legal advice. Chris was very supportive and knowledgeable, resulting in an optimum resolution in my favour. Would definitely recommend.

Posted 1 week ago

David M

Very professional and first-rate advice. I would use again. With thanks,

Posted 1 week ago

Anonymous

Got the job done swiftly without going too much in to detail.

Posted 1 week ago

Derek W

Redmans dealt with my case very efficiently and I was happy with the outcome.

Posted 1 week ago

Anonymous

Timely professional advice!

Posted 1 week ago

Anonymous

Very good service

Posted 2 weeks ago

Anonymous

I was in contact with Chris and then worked with Caroline on an employment matter. I was very pleased with the service and professionalism throughout, and came away with satisfied with the outcome. Would happily recommend.

Posted 2 weeks ago

Nikki

Received advice re employment law. Chris was very helpful and advised accordingly. Would happily recommend them and if ever I need help again, will not think twice before using them.

Posted 3 weeks ago

Samantha K

Absolutely brilliant thank you. Caroline Lewis is a legend

Posted 2 months ago

Anonymous

The legal advice was clear and helpful.

Posted 2 months ago

Davinder P

Good Service

Posted 2 months ago

Adrian V

I was using Redmans services for a Settlement Agreement. Very quick and professional service. The outcome was favourable and I was very pleased with the amendments and results. Pretty glad to recommend them for any type of legal advice.

Posted 2 months ago

Anonymous

Very responsive, efficient, clear and supportive. Thank you! Highly recommend.

Posted 2 months ago

Tiago S

Chris was always prompt to help me with legal matters that are beyond my comprehension and very helpful leasing with my former employer. I would recommend Redmans Solicitors to everyone who needs help.

Posted 2 months ago

Anonymous

Fast and professional advice tailored to what was needed. Thanks for your help Chris Hadrill and team.

Posted 2 months ago

Peter S

Really pleased with the outcome and the advice I had from Chris and Sacha.

Posted 2 months ago

Harika A

Redmans solicitor's helped me with my settlement agreement, Chris has been very helpful throughout the process.He was very prompt in his responses and made my settlement look simple.Special thanks to Caroline for her efficient communication, thorough explaination of contract terminology and negotiations.I highly reccommend Redmans solicitors for anyone seeking employment related legal help.

Posted 2 months ago