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Restrictive Covenants

Restrictive covenants are commonly included in employment contracts for senior staff.  They are designed to protect the employer from unfair competition by a former employee after the employment is over.


These covenants can take many forms, but the usual ones deal with the following in particular:


•  Competing for business;
•  Poaching clients;
•  Doing business with clients in the future;
•  Poaching key staff;
•  Interfering with suppliers;
•  Damaging the business of the employer.


They are separate from, but in some ways connected with, co-existing duties of confidentiality.


The consequences of breaching a valid restrictive covenant can be harsh and expensive.  Courts may impose far reaching and costly injunctions rather than simply awarding damages.  The new employer may be drawn into the dispute and asked to account for any profits that it has made as a result of the breaches.

 
Many restrictive covenants are not enforceable in practice.  The reason for this is that the law encourages free market competition, as a matter of public policy.  Therefore all such restrictions are, in principle, unlawful restraints of trade.


However the law also recognises that an employer who has built up a business over many years should not be subjected to unfair competition.  A balancing exercise is called for and it is difficult to know where exactly to draw the line in any particular case.  Restrictions must go no further than reasonably necessary to protect the employer’s legitimate business interests.  If they satisfy that test, then the likelihood is that they will be upheld. 


It is therefore vital to have expert legal advice if you are thinking about entering into an employment contract which might limit your ability to use your skills in the future.  It is of course even more important to take legal advice if you are considering acting in a way that might represent a breach of contract.  Act in haste, repent at leisure.


Our specialist employment solicitors have accumulated a vast wealth of experience in dealing with these complex issues, which require not just legal expertise, but also good business acumen and an appreciation of human psychology. 


We act for employers and employees alike and we can advise both in connection with the enforcement of such clauses, or their release, or their negotiation and drafting.  We are tenacious but fair and realistic in advancing our clients’ interests.

 

For more information please contact:
Bells Solicitors Limited.   Registered in England and Wales no. 07827988.   Authorised and regulated by the Solicitors Regulation Authority.   SRA number 569030.   VAT registration number 137595285