Post-Termination Restrictive Covenants – Do they offer sufficient protection to businesses?

Restrictive covenants usually exist in contractual agreement between an employer and an employee to protect a company’ legitimate business interests should the employee leaves, and the level of restriction is normally dependent on the employee’s job position.  However, unlike its name, a restrictive covenant should not be perceived as a restriction applying to limit the ex-employee only.  Rather, it should be seen as a balancing exercise: protecting legitimate business on one hand, and livelihood of the outgoing employee on the other. 

Mistaking the restrictive covenants as a preventive measure for stopping a departing employee from competing with it when she/he leaves is a commonplace, when in fact the covenants can only serve as pillars for businesses protection on its lawfully entitled assets (tangible or intellectual) against an ex-employee.

Express terms of restrictive covenants are usually tailored to match the needs of the parties, intending to act as a strong deterrence both to the employee against joining competitors of the employer and for the competitors which might see this working against them, making them more exposed to tort claims if the employee joins them.  Therefore, the general common law position is that the English courts are more inclined to accept the intention between the parties as paramount consideration, save for circumstances involving trade secrets, misrepresentation or duress.  Implied terms are also available to offer protection to both the businesses and the employees, promoting a better balance of rights and obligations between an employee and its employer.

Types of express restrictive covenants include, but not limited to the following:

• Non-competition covenants – restricting employees from working for a competitor.

• Non-solicitation covenants – prohibiting employees from soliciting clients or business partners of the employer.

• Non-dealing covenants – restricting employees from engaging in transactions with the employer's clients.

• Non-poaching covenants – preventing employees from inducing other employees to leave the employer and join a fellow competitor.

• Non-disclosure covenants – prohibiting employees from disclosing confidential information.

If you believe that you have an outgoing employee who has access to important company information and she/he would be using them to secure their new job with a direct competitor, you should act swiftly to seek immediate legal advice to prevent unwanted business harm resulting from the employee’s actions.  Speak to us today if you have concerns over an ex-employee’s behaviour or if you are alerted of a vital staff leaving with your customer contacts.  We are here to help you.

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 The information provided on this website is for general informational purposes only and should not be construed as legal advice. For legal advice, feel free to contact us for a full consultation.