Restrictive Covenants

A restrictive covenant is usually a clause in a contract which prevents an employee from either:

  • competing with any aspect of your business after their employment has terminated, or
  • soliciting customers of your business by using knowledge of those customers gained during their employment.

Your employer’s business may have information that is either integral and/or invaluable to its success, and it may therefore seek to restrict the use of this information by you after you have left the company. You may be an attractive asset to a competitor if you have had access to your employer’s client details and trade secrets, and your employer may decide to protect this information by including one or more restrictive covenants in your contract.

The standard types of restrictive covenants generally used include:

  • restrictions on working for a competitor;
  • non-solicitation covenants, which prevent you from poaching your employer’s clients/customers;
  • non-dealing covenants, which prevent you from any dealing with former clients/customers, regardless of which party approached the other;
  • non-solicitation of staff, which prevent you from poaching existing employees.

When agreeing to restrictive covenants in your contract, you must be mindful of certain factors:

  • The extent of the geographical area must not be too wide;
  • The length of time of the post termination restriction must not be too long;
  • The type of interest being protected should be justifiable. For instance, the protection of information such as trade secrets may be more justifiable than information regarding customer information, given that its potential use across markets is wider.
  • The level of restriction of the clause in relation to your position within the business. More senior employees are more likely to be in contact with more sensitive information, so more onerous restrictions may be more justifiable.

If you have agreed to certain post-termination restrictions in your contract and subsequently realise they are too onerous, it is for your employer to convince the court that the covenant is:

  • designed to protect their legitimate business interests; and
  • that it extends no further than is reasonably necessary to protect those interests

If you would like more detailed information about restrictive covenants or if you simply want to know more about your rights, Ashby Cohen can help you. We specialise in employment law cases, and our years of experience as employment lawyers make us uniquely qualified to assist you with any breach of contract issues you may have. Please contact us for an initial free consultation.

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