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Which? Legal explains what a post-termination restrictive covenant What is a restrictive covenant in an employment contract? 22 Jun 2021

While you’re employed, the law implies certain terms into your employment contract. These include the duty of trust and confidence, and the duty to serve your employer with good faith and fidelity (i.e. imposing a duty not to disrupt your employer’s business, not to compete, a duty of confidentiality, not misuse your employer's property, and not to disclose confidential information to third parties. These obligations sit alongside any additional express provisions mentioned in your contract.

Many employers are keen to protect their business interests by imposing additional obligations on you after your employment ends. These are commonly known as ‘restrictive covenants’.

A restrictive covenant is a clause in a contract of employment that limits your freedom to use certain information or to do certain things once you leave your employment. They can include things like restrictions on who you can work for, where you can work, and what dealings (if any) you are allowed to have with any clients and/or business contacts. It is also common to see clauses that seek to prevent ex-employees from poaching staff.

It’s worth noting that even if your contract doesn’t mention it, certain information by its very nature will remain confidential and you will be duty bound not to share it with others once your employment ends. This would include your knowledge of business plans, financial data and trade secrets.

How do I know if a restrictive covenant is enforceable?

This is a difficult question to answer, and ultimately, it will be for a court to determine whether a particular restriction can be enforced against you. The starting point is that any post-termination restrictions are void on the basis it is a restraint of trade and contrary to public policy. However, if your former employer can show that the restriction is designed to protect a legitimate business interest, and it goes no further than is reasonably necessary to do so, then a court will likely say it can be enforced.

Things a court will consider include: who you work for; what you do and your seniority in the organisation; the nature of the industry you’re in; how the clauses are worded; the duration of the restriction (the longer it is the harder it will be for your ex-employer to argue it is reasonable); and any geographical scope of the restriction (e.g. not being able to work for a competitor within a 5 mile radius is likely to be easier to justify than a 50 mile radius).

If the clause is simply designed to prevent you from competing against your former employer, then it will not be enforceable.

The enforceability of restrictive covenants is a complex area of employment law. If you would like to discuss any questions or concerns you may have about your contract or employment,join Which? Legal today. Our specialist employment legal advisers can provide you with the advice you need, on a range of topics.

Duncan Snook
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