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Restrictive Covenants

If an employer is concerned that its staff could harm the business when they leave, they will often include restrictive covenants in the contract of employment or consultancy agreement.

Restrictive covenants are most commonly used to prevent the solicitation of clients, dealing with clients, working in competition, or soliciting senior staff.

Given that restrictive covenants can prevent people from working, or at least working in their chosen industry for a period of time, whether or not they are enforceable in the Courts is subject to strict provisions.  For example, in order to be enforceable a restrictive covenant needs to: –

  • Protect a legitimate business interest
  • Be sufficiently narrow in scope in terms of duration and geography so as not to amount to restraint of trade
  • Be sufficiently well drafted so that it is clear what is being protected.

If a business is concerned that a departing employee is in breach, or is likely to be in breach of restrictive covenants they may serve injunctive proceedings in order to enforce the restrictive covenants.   If the business has lost money because of a breach of a restrictive covenant, the business may sue for breach of contract. 

The implications of restrictive covenant litigation for individuals can be serious.  The legal fees can be very high, and moreover, where financial damage is in play, there is a risk of having to pay huge sums in compensation.  

If you need advice on restrictive covenants in your contract, or if you have been issued with a threat of proceedings in respect restrictive covenants, our experts will be able to advise on the enforceability of the covenants and how best to deal with any threatened litigation.

Our experts will be able to advise on the enforceability of the covenants and how best to deal with any threatened litigation.