Breach of Restrictive Covenants
As a business, it is important to protect confidential and sensitive information to which employees have access. Restrictive covenants and non–compete clauses are included in an employment contract to prevent ex-employees from working in competition with your business, and to seek to protect sensitive and important information such as confidential knowhow, details of customers, clients or contacts, and even details of employees.
When will restrictive covenants and non-compete clauses be enforceable?
It is imperative that restrictive covenants and non–compete clauses are clearly drafted and defined, because ambiguous clauses can leave employers vulnerable. In order to be enforceable, the employer must demonstrate a number of conditions:
- The clauses must be reasonable in all the circumstances and an assessment of reasonableness will take place at the time they were entered into
- The clauses must be necessary to protect legitimate business interests
- The clauses must not prohibit the activities of an employee longer than is necessary to protect the interests of the business
- Absolute bans on the employee’s right to work in a specific industry or market will almost always be unenforceable, even for a short period of time.
- The clauses must be tailored to the employee’s role. An employee holding a senior position within a company, with access to confidential information, will be subject to more burdensome restrictions than an employee holding a junior role. It is also important to update restrictive covenants if employees are promoted
What types of restrictive covenants are there?
There are typically four types of restrictive covenants:
- Non–compete clause: These seek to prevent an employee from working for a direct competitor for a set period of time and within a specific geographical area following termination of employment
- Non–dealing clause: These seek to prevent an employee entering into work with your customers, clients and suppliers for a period of time following termination of employment
- Non–solicitation: These seek to prevent employees form contacting and poaching customers, clients and suppliers following termination of employment
- Non–poaching: These seeks to prevent employees from working and recruiting former colleagues for a set period of time following termination of employment
What is Gardening leave?
Gardening leave is often used alongside restrictive covenants and requires that an employee does not come into work, or works from another location, during the notice period. This is a tool an employer can use to protect the company’s confidential information at the time the employee is on his notice period. The employee will be entitled to full pay and contractual benefits whilst on gardening leave.
We can advise both employers and employees on their rights and obligations relating to restrictive covenants, and in the event that a dispute does arise we have the experience and expertise to seek a speedy and cost-effective resolution. We believe it is essential that an employer considers what they want to achieve when drafting restrictive covenants and employees need to keep in mind the obligations to which they are bound when entering into employment contracts.