Restrictive Covenants

Restrictive Covenants in Employment Contracts

A post-termination restrictive covenant usually limits what an employee can do after they have finished working for an employer. It might restrict an employee from contacting/poaching customers, clients, suppliers, or other employees. It may also restrict who an individual can work for, for a certain period of time.

Such restrictions are usually to protect the employer’s confidential information, customer connections, its goodwill and/or the stability of its workforce.

Restrictions have to be reasonable and cannot be too long or too harsh such as to amount to unlawful restraint of trade. Essentially, an employee must be permitted to work and earn money in some capacity, after their employment terminates. The more senior an employee, the more reasonable a restriction might be.

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Why does it matter?

We advise both employers and employees on the enforceability of restrictive covenants, and on breaches of the same. If an employee leaves their employment with restrictive covenants and breaches them, employers will need to understand how they can then manage those breaches. Similarly, an employee may have questions about their planned post-employment activities and whether they are breaching any covenants, and whether those covenants are enforceable.

We also work closely with employers at the outset of an employment relationship to ensure that any restrictive covenants included within the employment contract are reasonable and potentially enforceable.

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