Restrictive Covenants

What are Restrictive Covenants?

Restrictive covenants are contractual clauses designed to protect an employer's business interests by restricting the actions of current and former employees both during and after their employment. These covenants are critical for safeguarding confidential information, maintaining client relationships, and protecting investments in employee retention. The most common types of restrictive covenants include non-compete, non-solicitation, non-dealing, and confidentiality agreements.

Understanding Restrictive Covenants

Non-Compete clauses prevent former employees from joining a competitor or starting a competing business within a specific geographic area and for a defined period after leaving the organisation. They must be carefully drafted to balance the employer’s interests with the employee’s right to work.

Non-solicitation clauses restrict former employees from actively seeking to engage the company’s clients, customers, or other employees in business with a new employer. This type of covenant is designed to prevent former employees from exploiting the relationships and goodwill they developed during their employment. The clause must be specific about what constitutes solicitation and who is covered under its terms.

Non-dealing clauses go a step further than non-solicitation clauses by preventing former employees from doing business with former clients or customers, even if the client or customer initiated the contact. This clause is particularly useful in industries where client relationships are paramount and where clients may follow an individual to a new employer without being solicited.

Confidentiality agreements require employees to keep sensitive and proprietary information confidential during and after their employment. These agreements protect trade secrets, business strategies, client data, and other vital information from being disclosed to competitors or used for personal gain. Unlike other restrictive covenants, confidentiality obligations often have no time limit and can remain in force indefinitely.

Legal Considerations

For restrictive covenants to be enforceable, they must be reasonable in terms of duration, geographic scope, and the scope of restricted activities. The courts will assess whether the covenant is necessary to protect legitimate business interests, such as trade secrets, client relationships, or a stable workforce. If a covenant is deemed too broad or restrictive, it may be unenforceable, leaving the business vulnerable. When drafting restrictive covenants, it is essential to ensure that they are tailored to the specific role and responsibilities of the employee. Generic or overly broad clauses are more likely to be challenged and struck down by the courts.

How We Can Help?

At Dutton Gregory, we specialise in helping businesses implement, enforce, and defend restrictive covenants.

Drafting and Reviewing Agreements 

Our expert legal team will work with you to draft restrictive covenants that are clear, enforceable, and tailored to your business needs. We ensure that the clauses are appropriately balanced, protecting your interests while being fair and reasonable in the eyes of the law.

Enforcement of Restrictive Covenants 

If you believe a former employee has breached a restrictive covenant, we can provide robust legal support, including the pursuit of injunctions to prevent further breaches and the recovery of damages where appropriate. Our goal is to protect your business swiftly and effectively.

Advisory Services 

Beyond drafting and enforcement, we offer advisory services to help you understand the strategic use of restrictive covenants. We can assist in structuring these agreements in various employment scenarios, from senior executives to key technical staff, ensuring that your business is protected across all levels.

What next?

For more information about employment law advice, please contact us at contact@duttongregory.co.uk or contact Darren Tibble as head of our employment team.