Restrictive Covenants

Restrictive covenants in an employment context are typically clauses in a contract that seeks to prohibit an employee from certain activities when the employment contract ends.

The most common restrictive covenants used by employers are:

– non-solicitation (prevents poaching, i.e of clients, customers, suppliers)

– non-poaching (prevents poaching of former colleagues)

– non-dealing (prevents dealing with former clients, customers, suppliers)

– non-compete – (prevents the employee from working in similar employment for a competitor)

A restrictive covenant is deemed void on the grounds of restraint of trade and public policy, unless the employer can show that the restrictive covenant (1) is designed to protect the companies legitimate business interests and (2) it extends no further than is reasonably necessary to protect that legitimate business interest.

It is therefore important to have particular regard to the relevant business and employee when drafting the restrictive covenants as opposed to offering the same clauses every time which is often the case.

Legal action in this area can be notoriously difficult and time-consuming. If there is a suspected breach of a restrictive covenant it is vital to act quickly and ensure the evidence-gathering phase is effective.

If you require assistance in this area then please get in touch.

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