Restrictive Covenants in Your Employment Contract
If you’re planning to leave your job to work for a competitor, your employment contract might contain a restrictive covenant to give the employer you're leaving some protection. Restrictive covenants are varied but generally limit your ability to take business secrets from one company to another. We explain the restrictive covenants meaning, what it means for you and whether it’s enforceable.
Restrictive covenants meaning
These are ‘post-termination clauses’ in your contract of employment. This means they still apply after your contract has ended. They are put in place to stop you from taking certain actions. Such as working for, or sharing information with, a competitor after the end of your employment, for a limited amount of time.
These restrictions are put in place to protect aspects of the business including:
- Confidential company information
- The company client base
- Other members of staff
These clauses may be in your contract from the outset of your employment. However, it is possible for your employer to add in or amend a clause, after you have commenced employment.
Legally, you don't have to accept any changes being made to the restrictions in your contract, but, it is worth considering the consequences of disagreeing to the changes. If you refuse to accept the changes you might be dismissed unfairly. However, you won’t be able to claim for unfair dismissal at tribunal if you've had this job for less than two years.
If your employer enforces the change without your consent which makes you feel forced to resign, you may be able to make a claim for constructive dismissal instead. If your employer has made unacceptable changes to your contract without your consent, talk to one of our employment solicitors today.
It is more likely for these covenants to be in place if you are a senior member of staff. This is because you're probably in more regular contact with relevant customers and clients, you have wider access to company data and you are more likely to be influential to other members of staff.
You may also find restrictive covenants in place in a settlement agreement between you and your employer.
Common restrictive covenants
Non-solicitation of clients | Prevents you from actively seeking business from customers from your previous work place. |
Non-poaching | Prevents you from hiring or attempting to recruit employees from your former workplace |
Non-compete | Prevents you from working for a rival company, or starting your own similar trade for a specified time after leaving your current workplace. |
Non-disclosure | Prevents you from passing on any confidential or sensitive information about your current employer or clients. |
Durations may vary as to what is seen as ‘reasonable’. More commonly they are between 3, 6 or in some circumstances 12 months.
In some cases, your post termination clause(s) may be negated by your notice period. For senior members of staff, this could be 6 months, in which you may be put on garden leave, another measure in which your employer may take to protect aspects of the business. To find out more visit our page on garden leave.
Enforcing restrictive covenants
Your employer can’t just put any restriction on you if you’re seeking new employment. In order for it to be enforceable, you must have agreed to it in your original contract, or at a later date, it must be deemed ‘reasonable’ and your employer must be able to clearly show that:
- Without the clause, any action that you take following the end of your employment could harm the business.
- There is a legitimate business interest that needs protection.
- The clause is reasonable in terms of limitations, geography and time-scale.
If you go against a post termination clause that is reasonable, it would be considered a breach of contract and could incur serious action being taken by your previous employer.
When are they not enforceable?:
In certain specific circumstances, including:
- Your employer breached the terms of your employment contract when they terminated your employment. For example: They did not follow the proper disciplinary or grievance procedure.
- You are forced to resign as a response to your employer’s breach of contract. For example: They reduced your rate of pay, without your consent.
If you are seeking advice on whether your restrictive covenant is enforceable, contact one of our employment solicitors.
Frequently Asked Questions
They still apply regardless of the nature in which you leave the business as long as your employer is not in breach of contract and the restrictions are considered reasonable. Therefore, redundancy itself does not make the restrictions unenforceable.
As an example, your contract might say:
“You are not permitted to work for a competitor within a 50-mile radius for a period of 12 months after your employment ends. This is to prevent your from sharing important, current company data with your new employer, which would cause detriment to our business.”
Yes, they are legally enforceable clauses in your employment contract as long as they are reasonable and tightly define that they are protecting the business interests.
Do you have a problem with your restrictive covenants?
There is much more to winning your case than simply being in the right, our specialist employment solicitors know all the laws and tactics, to make sure you get the best chance at a fair settlement. Get in contact with us and see how we can help.
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This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of our company. For employment law advice please get in contact and speak to your employment law solicitors.
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