Restrictive covenants and contracts of employment

Alan Price – CEO at BrightHR

May 10 2016

All businesses have information which they consider the foundation of their success which makes it invaluable. For many employers it is important to keep this information within the business and restrict employees from using it after their employment has ended, either when working for a new employer or becoming a competitor. This can be achieved through a restrictive covenant which can be included in the contract of employment or other documents which make up the contract. There are a range of different restrictions that can be included in a restrictive covenant, a combination or all of which can be included in a single contract depending on the needs of the business. They are:
  • Confidentiality Clause – This clause requires the employee to keep secret all confidential information he has access to and any trade secrets the employer might have. This clause can be included in addition to an implied term of confidentiality to the employer if the individual has access to confidential information, e.g. staff medical records or clients contact information.
  • Non-Solicitation Clause – This places a duty on the ex-employee not to approach current or prospective clients or customers with the intention to enter into a contract with them.
  • Non-Dealing Clause – Although a non-dealing clause prevents an ex-employee from entering into business with current or prospective clients just like a non-solicitation clause, it extends the scope of the ban to cover situations where the clients have approached the employee themselves and the ex-employee has not initiated discussion.
  • Non-Compete Clause – A non-compete clause places a duty on the employee not to work in competition with you. This includes starting their business in the same industry or working for a competitive employer. It was recently announced by the Government that it would undertake a review of the use of non-compete clauses to see if they are preventing innovation and entrepreneurship in Great Britain.
  • Non-Poaching Clause – This clause can prevent an ex-employee from approaching and “poaching” other members of your staff. This means inviting your current employees to leave your business to work for the ex-employee (if they have started their own business) or for a new employer (if they work for a competitor).
Whether a restrictive covenant is enforceable or not is for a court to decide. In order to be enforceable, a covenant should only seek to protect the employer’s legitimate business interests in a reasonably necessary manner. The duration and scope of the restrictive covenant must be reasonable. If the covenant is too lengthy or poses a wide geographical restriction it may affect its force.

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