Restrictive covenants – what you need to know

What is a restrictive covenant?

All businesses have information and knowledge that helps them operate and potentially gives them an edge over competitors. When an employee leaves it can be devastating to lose their expertise but it can be even worse should they decide to take important information with them. Restrictive covenants can protect a business against such a scenario.

During their time at a business, employees may have built up strong relationships with key clients and so may try to carry on working with them after leaving their employment. They may have had access to databases of client information or other valuable assets.

Although many employment contracts imply certain restrictions they aren’t usually enforceable after employment ceases. Restrict covenants, however, do extend after employment so long as they can demonstrate that there is a legitimate interest that needs to be protected and that the amount of protection is reasonable within ‘time and scope’.

A restrictive covenant can prevent a former employee from:

• Soliciting the business’ clients
• Dealing with the business’ clients
• Working with a competitor or setting up in competition
• Poaching former colleagues
• Disclosing confidential information

Restrictive covenants must be carefully planned and need to detail which specific aspects of a business require protections, or they run the risk of being invalid. For specialist employment law advice contact Aneil Balgobin via email ABalgobin@rollingsons.co.uk or by telephone on 0207 611 4848.