Restrictive Covenants Solicitors
Restrictive covenants can be found in many employment contracts. They are designed to help employers protect key business information and their customer base. However, as an employee, you may question the fairness of the restrictive covenants you have signed or been asked to sign.
You may be wondering whether a restrictive covenant in a contract or agreement is enforceable, especially if you have received a letter threatening action against you claiming you have breached them.
IBB Law’s employment law team can provide clear, practical guidance on restrictive covenant and whether they are likely to be enforceable. Our team includes some of the region’s top ranked employment lawyers with decades of experience representing employees of all levels.
How do restrictive covenants work?
Restrictive covenants can apply to employees, workers, consultants, contractors, partners, office holders, shareholders and members of a limited liability partnership.
For the purposes of this webpage, the information provided is in the context of employee and employer but the principles remain the same.
Restrictive covenants are often included as clauses in your employment contract or in a separate agreement. The purpose is to prohibit you from doing certain things during your employment (e.g. sharing sensitive business information) or after your employment ends (e.g. by working with your employer’s customers) and are referred to as post-termination restrictive covenants. Such post-termination restrictions will generally only be enforceable where your employer has provided valuable consideration for agreeing to them (e.g. the offer of employment or a pay rise).
Restrictive covenants are intended to protect your employer’s legitimate business interests and should extend no further than is reasonably necessary to protect those interests. If not, a restrictive covenant may be unenforceable.
If your employer believes that you have breached a restrictive covenant you signed, it will generally need to take court action to show that:
- you have broken the terms of the covenant
- the covenant meets the necessary standard to be enforceable.
What is garden leave?
Many employment contracts will include a garden leave clause, specifying that you will not work for your employer during your notice period and will simply sit at home. Excessively long periods of garden leave may be unenforceable, so this is always worth checking with specialist employment solicitors if you have a concern.
Normally, any period of garden leave, will reduce the length of any post-termination restrictive covenants by the time you are sat at home.
Are there different types of post-termination restrictive covenants?
There are various types of restrictive covenant that you may be asked to sign by your employer, which are:
- non-compete, which restricts you from taking similar employment with a competitor of your employer
- non-solicitation, which prevents you from contacting trade connections of your employer or former employer and attempting to secure work from those trade connections
- non-dealing, which prevents you from working with your employer’s trade connections, regardless of whether you approached the trade connection
- non-poaching, which prevents you from attempting to ‘poach’ employees from your employer (e.g. if you intend to start your own rival business or wished to convince co-workers to join you at a new company).
How do restrictive covenants affect your rights?
You generally have the right to terminate your employment with your employer and seek alternative employment elsewhere as you see fit. Anything that interferes with that right may be considered a restraint of trade and therefore not enforceable.
Restrictive covenants cannot generally interfere with your rights to:
- make a living in your chosen profession or industry
- place unreasonable restrictions on you
- go beyond protecting your employer’s legitimate business interests
- be unreasonable for your position within the business.
However, a restrictive covenant may trump your rights under certain circumstances, if the clause has been correctly drafted and consideration has been provided for agreeing to the restrictions.
What are enforceable restrictive covenants?
Whether or not a restrictive covenant will be enforceable depends on several factors.
The three main factors are that the terms of the restrictive covenant must:
- be designed to protect your employer’s legitimate business interests
- not place unreasonable restrictions on you
- not be excessively wide in scope.
Specific factors that may affect whether an employment restrictive covenant is enforceable include:
- the geographical area of the restriction
- the length of time of the restriction
- the activities that the employer is trying to restrict
- the type of interest being protected (e.g. trade secrets may be granted wider protection than customer information, given that its potential use across markets is wider)
- your position within the business.
If a restrictive covenant comes before a court for a decision on whether it is enforceable, the default position is that it will not be. It will be for the employer to argue that the covenant is enforceable and when deciding this, the courts will typically pay attention to what is standard practice in the industry.
Restrictive covenants may initially look too wide and unenforceable. However, courts can sever parts of the clause applying what is called the blue pencil test, provided that upon removal there would then be no need to add to or to modify what remains and the removal would not generate any major change in the overall effect of all the post-termination restrictive covenants in the contract (Tillman v Egon Zehnder Limited).
What happens if you are asked to sign a new employment contract which has restrictive covenants?
If your employer asks you to sign a new employment contract or a separate agreement which includes restrictive covenants that you do not agree with, you can refuse to sign the contract or agreement. You should take legal advice from specialist employment solicitors before you do this.
Our expertise with restrictive covenants
Our employment law team have decades of experience advising employees on restrictive covenants and their effects, as well as all other issues related to employees’ terms of employment.
IBB Law is one of the top ranked legal firms for employment law in the South East. We are ranked Tier 1 by the highly respected Legal 500 client guide and Richard Devall from our employment team having been recognised by Chambers and Partners as a leading individual in the field of employment law.
Contact our specialist restrictive covenants solicitors today
No matter your situation, if you have concerns about an employment restrictive covenant, at IBB Law our employment law specialists will help you find a way forward that allows you to manoeuvre through the legal consequences.
Contact our specialist restrictive covenants solicitors today on 03456 381381 or email your details to email@example.com.
The material contained in this web page is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.
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