Filter news
Restrictive Covenants and How To Use Them

Restrictive Covenants and How To Use Them


Expert view

When key people leave your business or organisation, it can be a worrying time, particularly if they are going to work for a competitor. Concerns will include how to stop them using the sensitive information they have and how to stop them taking your clients.

Having a restrictive covenant in place means you can protect your business in this time of uncertainty, but there are some key aspects of restrictive covenants that you should be aware of.

Restrictive covenants are usually placed in employment contracts, so you’ll need to make sure that these are in place for your key people in their signed contract of employment.

Many businesses make the mistake of making restrictive covenants as wide as possible, but when tested in court, this can result in the covenant being unenforceable. By working with an employment law solicitor, you can identify the most crucial parts of your business that need protecting and focus your restrictive covenant in those areas.

You’ll need to show that the restrictive covenant does not go any further than necessary to protect your legitimate business interests so it’s worth thinking carefully. Some of the types of restrictive covenants available are:

  • No Competition – this would put restrictions on your ex-employee working for a competitor in a similar role for a period of time
  • No Solicitation – this would stop your ex-employee from taking any customers, suppliers or clients with them to their new role.
  • No Dealing – this would stop your former employee from having any contact or dealing with any customer, supplier or client. It wouldn’t matter which party contacted the other, the no dealing would still apply.
  • No Poaching – stops your ex-employee from taking members of your staff with them.

You can’t simply include all of these factors, across a broad geographical range for ten years, as this would be unlikely to stand up if tested.

Instead, you should focus on the key aspects that most affect your business. You should also think carefully about the geographical area the restrictive covenant should cover, if this type of restriction is necessary, and how long it should run for or if another type of restriction is more appropriate.

Once decided, this needs to be included in the contract of employment and regularly reviewed with new appointments as the parameters of the restrictive covenant may change, and the enforceability of any covenant is based on the time it was accepted and the status of the employee it relates to.

Using garden leave alongside a restrictive covenant can help you to make sure that your employee has no access to confidential information, records or contact details of clients, customers and suppliers during their notice period.

It’s important to arrange for their laptop, mobile telephone and any other documentation they have relating to your business is returned quickly and before they start their garden leave. Again, any garden leave clause has to be in their employment contract and has to be reasonable to be enforceable.

Even if you’ve taken all of these steps, the restrictive covenant can still be breached. You can take action if a breach does occur. Initially, you should take advice from an employment law solicitor as soon as you are aware of the breach. You need to take action immediately so you can limit the damage of the breach.

Your solicitor will send a letter to your former employee, along with a copy to their new employer, who may also be liable for the breach, asking them to cease and advising them that you will seek an injection against them. If they do not stop, you can seek an injunction at court.

So the key considerations about restrictive covenants are:

  • Get legal advice as soon as possible
  • Plan ahead and make sure you have an appropriate restrictive covenant in place at job offer stage
  • Make sure you’ve not been too broad in the restrictive covenant
  • Be prepared to follow through to an injunction if the restrictive covenant is breached

If you need to put a restrictive covenant in place, call our Employment Law team now on 0117 926 4121 or make a free enquiry online.