Restrictive covenants are the terms in a contract of employment that restrict an employee’s freedom, usually to work for a competitor for a period of months or years after employment has ended.
We regularly come across employees and experienced business people who think that restrictive covenants are unenforceable. Like many myths, there is an element of truth to there. It is correct that the Courts will not enforce contracts that are simply anti-competitive.
However, restrictive covenants are enforceable if they are ‘reasonable and necessary’ to protect the employer’s legitimate interests, such as their confidential information or goodwill in customer relationships that is the result of their business investment.
The key to effective restrictions is careful drafting appropriate to circumstances of an employer’s business. We know what works and when our drafting for companies has been challenged in Court it has been upheld.
We can also spot what doesn’t work and where restrictions are unenforceable or, occasionally, worked around.
If you are concerned that you may be breaching restrictive covenants, or someone is alleging you are doing so and threatening court action against you, you should take expert advice without delay. A well drafted and appropriately assertive letter from us in response may often lead to a short exchange of correspondence that is a sufficient to cause the employer to hesitate and hold off issuing proceedings. There are a range of tactical options to deploy but which we shall not go into on this website so as not to alert your opponent to them.
In any event, if correspondence doesn’t work, you need to know how you will defend yourself and how to respond if legal proceedings are issued. Decisions may need to be made quickly as injunctions might be sought i.e. orders from the Courts, on penalty of imprisonment if not followed, that you behave in a certain way (for example, cease soliciting business from the company’s customers). This can be serious stuff!
If you’re being pursued or have any concerns about the effect of restrictions in your contract, or about any contract you are considering entering, give us a call.