We’ve been instructed twice in relatively quick succession by a client who has had two employees breach the restrictive covenants in their respective employment contracts.
While we are happy to report that we have managed to deal with both matters swiftly and efficiently, both cases do raise some interesting points worth sharing with you.
We know you’re busy. This is why we have kept this brief and helpful.
What is a restrictive covenant?
A restrictive covenant is a clause (or clauses) in an employment contract which places post-employment restrictions on an employee (often key or senior) for a period after they have left their ex-employer. Restrictive covenants are becoming more and more commonplace, and being applied to all levels of staff within an organisation. So it is important to consider them in a bit more detail.
Why have them?
In short, protection! Employees (especially key or senior) are likely to have gained valuable insight into how a company operates. Often, senior employees will build good relationships with key client contacts as well as a rapport with staff.
To prevent the possibility of a company losing key clients or staff immediately after an employee leaves, the employee will often be subject to restrictive covenants designed to protect the ex-employer.
There are many restrictive covenants, but the most common are:
- One that prohibits an ex-employee from competing with their ex-employer for a certain period after the ex-employee has left the business.
- One that prevents an ex-employee from contacting and/or dealing with any of their ex-employer’s clients for a certain period after the ex-employee has left the business.
- One that prohibits an ex-employee from divulging confidential information relating to an ex-employer’s operation.
- One that prevents an ex-employee from approaching staff of the ex-employer with a view to taking them to their new place of work.
How do I enforce a restrictive covenant that I think has been breached?
In order to answer that question, it is important to look at how the courts approach this area. While each case depends on its facts, the courts generally consider the following:
- Does the ex-employer have a legitimate interest to protect?
- Is the restriction reasonable?
- Is the restriction necessary?
In addition to this, the courts always construe restrictive covenants in employment contracts more strictly than in other areas. Please also note that the courts will also ensure that the covenant is not drafted in such a way that it prevents any competition with the ex-employer.
Tip
To quote Denzel Washington in Training Day, “It’s not what you know, it’s what you can prove.” So if you are thinking of enforcing a breach of a restrictive covenant, gather as much evidence as possible. It will assist.
Final thoughts
This is a very specialist area of law. If you, or someone you know needs advice in this area, please get in touch immediately. The law relating to restrictive covenants is extensive, so please do not treat this as comprehensive legal advice.
