Every business will have valuable knowledge, confidential information and a stable workforce that it considers key to its success. If an employer wishes to protect the use of this information both during and after a period of employment they may include restrictive covenants in their employee’s contract. Other practices, such as remuneration of incentive practices arguably have the effect of restraining employees’ future activities, thus limit competition. Employers may wish to consider on long term incentive plans, deferred remuneration and bonus schemes.
A restrictive covenant can be used to prevent an employee from competing with their ex-employer for a certain period after the employee has left the business, taking their colleagues to form a new team, or prohibiting them from working with the company’s customers using knowledge gained during their period of employment.
Our solicitors can assist with drafting carefully worded enforceable restrictive covenants for businesses and can also assist in the enforcement of them post termination.
There are different types of restrictive covenant and the type that is most appropriate will depend on the business interests that the employer is seeking to protect:
Non-solicitation of customers, potential customers
Non-poaching of employees or consultants
Non-dealing with customers or potential customers
Non-interference with suppliers
Non-competition with the business.
In order for a restrictive covenant to be enforced it must be considered to be reasonable and necessary to protect the business interests. It is therefore important that a restrictive covenant is carefully drafted. A business should regularly check contracts that include restrictive covenants and ensure that they are updated if necessary.
If you have reason to believe that an employee may have breached their restrictive covenant you can talk to our solicitors to seek advice. Our “rogue employee” questionnaire details the important information that we will require in order to consider your business’ individual circumstances.
A strongly worded letter may deter them from continuing but you may have to act quickly to enforce the covenants in the High Court. Injunctive relief will be granted if:
- There is a serious issue to be tried;
- There is at least 50% prospects of success at trial;
- Damages will not be sufficient as remedy.
The Court will also consider who, on the balance of convenience, would be most prejudiced by the grant/lack of an injunction. In the alternative, employers should consider and take advice on other remedies, including damages, search orders, springboard injunctions (against the ex-employee’s new employer), lost profits and the tort of inducement.
If you are concerned about protecting your business and would like to discuss restrictive covenants with our solicitors please do not hesitate to get in touch.