What does employment law say about restrictive covenants?

Restrictive covenants are not commonly used in employment contracts, but may be more prevalent for higher positions where it is important to restrict certain activities of an employee in order to safeguard the interests of the business. For example, an employer may choose to set as a condition of employment that an employee enter into a restrictive covenant that they will not work with a competitor within a certain period of time following the termination of employment with the employer. These sorts of covenants are frequently used with directors and other senior positions. However, they may also be used for ordinary employees and contractors. You are advised to consult an employment solicitor if your employment contract contains restrictive covenants.

Basically, restrictive covenants are designed to protect the business. It may seek to protect the clients or suppliers of the company from being targeted by a competitor, or to protect trade secrets from being shared with a competitor. They can be used to protect a broad range of legitimate business interests, including the goodwill and reputation of the company.

However, employment law limits the use and scope of restrictive covenants: they may not go further than what is reasonable or necessary to protect legitimate business interests, or else a court can declare them to be void and unenforceable as a restraint of trade. Basically, it cannot be an unfair restriction of competition or free employment.

If you are an employee being asked to sign a restrictive covenant, you should seek legal advice from an employment solicitor to ensure that it is reasonable and not adverse to your interests. Employers should similarly seek employment law advice from an employment solicitor to ensure that the restrictive covenant is not at risk of being later rendered void and unenforceable.

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