Post Termination Restrictions

Restrictive covenants are clauses in employment contracts that limit an employee's actions after they leave the employer, such as working for a competitor, soliciting or dealing with former clients, or poaching former colleagues. These clauses are intended to protect the employer's legitimate business interests, such as confidential information, trade secrets, goodwill and customer relationships. However, not all restrictive covenants are enforceable, as they may be seen as unreasonable restraints of trade that infringe the employee's freedom to work.

Why you need expert legal advice

If you are an employer who wants to ensure that your restrictive covenants are valid and effective, or if you are an employee who faces a potential breach of contract claim for violating a restrictive covenant, you need expert legal advice from a team of experienced employment solicitors. That's where we can help.

Issues that frequently arise are:

• The reasonableness of restrictions
  • The general rule in the UK is that a restriction will only be enforceable if it goes no further then reasonably necessary to protect an employer’s legitimate business interests
  • What is reasonable will depend on a number of factors:
    • Some types of restrictions (e.g. a non-competition restriction) are more restrictive than others (e.g. a non-dealing restriction), so there is a higher burden of proof on employers to show that a non-competition restriction is reasonable
    • Restrictions are more likely to be enforceable in some industries than in others (for example, it might be harder for an employer in a niche industry where a small number of providers all service the same few customers to enforce a restriction on an employee from dealing with any customers because that restriction would effectively stop the individual working in the industry)
    • The role of an employee makes a difference: it is likely to be easier to justify a restriction for an employee in a customer-facing sales role than it is for an employee who works in an internal facing role (e.g. finance, HR) 
    • The reasonableness of a restriction will be judged at the time at which it was entered into (for example, when the employment contract was signed) and not the time at which the employee leaves
    • The geographical scope of restrictions: whilst not relevant to every role or industry, there will be cases where an employer can show that a restriction is reasonable by limiting it to the employee operating in a certain geographical area (e.g. where the bulk of its business is transacted)
    • The length of the restriction: there is no specific time period that is automatically deemed to be reasonable. What might be reasonable for an employee in one role might be unreasonable for a different employee in another role or industry
• Evidence gathering
  • Employers who suspect former employees of breaching their post-termination restrictions will require evidence of such breaches. This may include forensic examination of computers and other devices
• Settling disputes
  • Post-termination disputes can be very expensive for all parties and it may be that a resolution can be achieved without recourse to litigation. This can sometimes be in the form of agreed undertakings from a former employee that they will abide by restrictions or by negotiated variations to the restrictions (for example, an employer releasing to the employee a small number of specific named clients, but maintaining restrictions in respect of its major clients)
• The global dimension
  • Employers who operate outside the UK need to recognise that rules in relation to post-termination restrictions and their enforcement vary across different jurisdictions
• Garden leave
  • The contractual ability to place an employee on garden leave during their notice period can be valuable for an employer seeking to protect its interests. Whilst the employee will continue to receive their salary and benefits, an employee might see this as a worthwhile cost in order to keep the individual out of the market place and away from their customers. This enables the employer to create a new relationship with its key customers, reducing the employee’s influence and reducing the threat they pose to the business once their notice period ends
• Team moves
  • Employers often seek to include restrictions that seek to prevent whole teams migrating to competitors

Post-employment restrictions might not be the only way for an employer to protect its business interests and connections. For example, for senior employees or in certain sectors, deferred payment schemes are used to provide a practical incentive for employees not to damage their employer’s interests. Typically these schemes (e.g. share option schemes) involve the delay of a reward in order to maintain an employee’s loyalty. Advice should be sought when creating such schemes.

How our employment solicitors can help

We have a dedicated team of employment solicitors who can advise you on all aspects of restrictive covenants, from drafting and reviewing them, to seeking high court injunctions to enforce them. We have a wealth of experience in dealing with complex and high-profile cases involving restrictive covenants, both in and out of court.

We can help you achieve your objectives, whether you are an employer who wants to protect your business assets and contacts, or a senior employee seeking to secure your freedom to work, or resolve a dispute amicably.