Restrictive covenants are clauses often found in employment contracts that limit what an employee can do during and after their employment ends. While they are intended to protect legitimate business interests, they must also be reasonable and proportionate to be enforceable under UK employment law. Understanding your rights as an employee in relation to restrictive covenants is crucial, particularly when leaving a role or facing legal threats from a former employer.
What are restrictive covenants?
Restrictive covenants are contractual clauses that aim to restrict an individual’s actions during or after their employment. These clauses are typically designed to prevent former employees from taking actions that could harm their previous employer’s business. Common types include non-compete clauses, non-solicitation clauses, non-dealing covenants, and confidentiality provisions.
While these clauses are widely used, the law sets limits on how restrictive they can be. Courts will only enforce them if they are deemed to protect legitimate business interests and are reasonable in scope, duration, and geographic area.
Types of restrictive covenants
There are several different types of restrictive covenants commonly used in employment contracts. Each serves a different purpose and may impact your post-employment freedom in various ways:
- Non-compete: Prevents you from working for a competitor or starting a similar business for a specified period after leaving employment.
- Non-solicitation: Prevents you from approaching former clients, customers or suppliers to do business with you or your new employer.
- Non-dealing: Stops you from doing business with clients or customers of your former employer, even if they approach you first.
- Non-poaching: Stops you from encouraging former colleagues to leave their jobs and join you elsewhere.
- Confidentiality clauses: Prevent disclosure or use of confidential information gained during your employment.
Are restrictive covenants enforceable?
Restrictive covenants cannot be enforced simply because they exist in your employment contract. To be legally enforceable in the UK, they must meet specific legal criteria. Most importantly, they must protect a legitimate business interest, such as trade secrets, client relationships, or commercial goodwill. In addition, the restrictions must be reasonable in both time and geographical scope.
The burden is on the employer to demonstrate that the covenant is necessary to protect its interests and does not go further than is reasonably required. If a court finds that a covenant is too broad or excessive, it may strike down the entire clause, rather than modifying it.
Reviewing the reasonableness of a covenant
In assessing whether a restrictive covenant is enforceable, courts take into account several factors. These include the nature of your role, your seniority within the organisation, the type of information or relationships you had access to, and the scope and duration of the restriction. For example, a non-compete clause lasting 12 months may be considered excessive for a junior employee with limited access to clients or sensitive information.
In contrast, a shorter covenant focused on a specific geographical area or limited set of clients may be seen as a proportionate means of protecting business interests. Each case turns on its own facts, and the courts aim to strike a fair balance between protecting business interests and not unduly restricting an individual’s ability to earn a living.
Your rights as an employee
As an employee, you have rights when it comes to restrictive covenants. These clauses must be clearly explained to you and ideally brought to your attention before or at the point of signing your employment contract. If changes are made to your contract during employment that introduce or amend restrictive covenants, these must be supported by fresh consideration, such as a pay increase, promotion, or other benefit.
If you are considering leaving your role and are unsure how a restrictive covenant in your contract may affect your next steps, we recommend seeking legal advice. Early legal guidance can help you interpret the scope of the clause, determine its likely enforceability, and ensure you do not unintentionally breach your obligations.
Defending against enforcement
If your former employer threatens legal action on the basis of a restrictive covenant, do not panic. You have the right to challenge the enforceability of the clause. Defences may include claims that the covenant is unreasonably broad, poorly drafted, or no longer applicable due to changes in your role or the employer’s business.
In some cases, employers may apply for an interim injunction to prevent you from breaching a covenant. Courts do not grant these lightly and will consider whether the employer is likely to succeed at trial, whether damages would be an adequate remedy for any breach, and the balance of convenience between the parties.
Seeking independent legal advice
At Stephensons, we have extensive experience advising individuals on restrictive covenants in employment contracts across a range of industries and seniority levels. Whether you are negotiating a new contract, considering leaving your current role, or facing legal action from a former employer, we can guide you through your rights and options.
Our employment law specialists will assess the wording of any restrictive covenant, advise on its likely enforceability, and represent you if a dispute arises. It is important to act quickly, particularly if you have received a solicitor’s letter or court documents. Early legal advice can make a significant difference to your position and help protect your future career prospects.
Call us today
To speak to one of our employment law experts at Stephensons, complete our enquiry form.
Comments