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Restrictive Covenants in Employment Contracts

Employers can incorporate clauses into an employment contract so that an employee agrees to do or not to do certain things after leaving employment, eg returning company property or not seeking to poach business contacts to the benefit of a new employer. These are known as restrictive covenants.

There are four types of Restrictive Covenants:

  1. Non Competing Covenants - seek to prevent employees working for a competitor or directly competing with an employer's business, usually within a set period or within a certain geographical area.
  2. Non Solicitation/ Non Dealing Covenants - seek to prevent employees working with former customers or 'churning' customers by encouraging them to place orders for goods or services with a new employer, who may be a competitor, usually within a set period.
  3. Non Poaching Covenants - seek to prevent employees recruiting former colleagues for a new employer, usually within a set period.
  4. Restrictions on Use of Confidential Information – seek to prevent the use of confidential information by former employees.

Restrictive covenants must go no further than is reasonably necessary to protect an employer's legitimate business interests, otherwise they will be legally unenforceable. Proving that a restrictive covenant is reasonable depends on various factors such as the nature of the employee's job, whether the employer is local or national and whether the restrictive covenant covers all employees or just employees in certain roles.

If you are considering drawing up employment contracts with restrictive covenants, call Ashley Hunt, Carrie-Ann Randall or Vaishali Thakerar on 0116 212 1000 or complete the form on the right now for advice. Please also see our page on Employment Contract Healthchecks where Lawson-West look through existing contracts of employment and give advice. You may also find our page on Changing Terms and Conditions of Employment Contracts useful.