Restrictive covenants are often included in employment contracts and sometimes feature in confidentiality and share option arrangements. Their purpose is to restrict the activities of a former employee for a limited time after termination of the employment.
What types of activities may ‘restrictive covenants’ prevent?
The most common types of prevented activities are:
- Competition
Not to work for a competitive business.
- Solicitation
Not to contact or deal with former customers.
- Poaching
Not to be involved in trying to convince former colleagues to follow you to the new business.
Should you be concerned about the restrictive covenant?
The short answer is: it depends.
Courts do not like restrictive covenants because they might interfere with a person’s freedom of movement or restrain them from practising their trade. It will, however, allow restrictions which are reasonable. ‘Reasonable’ means the term’s purpose is to protect a legitimate business interest and its duration is only as long as the company truly needs to protect the legitimate business interest.
In practice, this means non-compete provisions tend to be the most difficult to enforce and periods of restraint longer than 12 months are unlikely to be reasonable. It will depend on the seniority of your position, how much you are paid, the length of your notice period, the risk you pose to the business and similar factors.
A legal adviser asked this question will need to understand your specific concern, your objectives, your sensitivity to risk and about your former and prospective roles. This is actually quite an involved subject and the reality is you will not likely be able to guarantee the employer will not anyway try to take legal action. Tread carefully and take advice is the best advice I can give in such a situation.
The Government’s plan to limit non-compete clauses
The former Conservative Government planned to limit non-compete clauses to 3 months’ duration. It is unclear whether Labour will resurrect this plan, even though its signalled (and expected) intention is to make employment law more employee friendly.
Note that you will always be obliged to protect the trade secrets of your employer – things that you could only know having been their employee – as this is protected under common law regardless of what your contract says.
This blog was written by Ben Lindsay, Solicitor at didlaw.
