Restrictive covenants, also known as post-termination restrictions or non-compete clauses, are terms in employment contracts or other agreements which seek to restrict an individual’s ability to compete with their employer’s business once they have left that employment.
The Employment Law specialists at Banner Jones are able to advise you on any issue that may arise as a result of restrictive covenants in a employment contract, shareholder agreement, partnership agreement, settlement agreement, business/share sale agreement or consultancy agreement.
The law relating to restrictive covenants is complex and ever changing, with employers having the ability to seek injunctions against former employees, as well as damages for any loss they incur as a result of any breach of an enforceable covenant provided that they can show that they have a legitimate business interest to protect and that the restriction goes no further than necessary to give them that protection.
As a general rule, non-competition clauses that prevent an employee from competing with their former employer’s business are unenforceable because they are viewed as unlawful restraints of trade, whilst non-solicitation or non-dealing clauses are allowed as they are designed to go no further than reasonably necessary to protect the employer’s legitimate business interests. However, this varies from one sector and industry to another and one role to another. You should therefore seek expert legal advice about the wording of any restrictive covenant in light of the sector or industry your business operates in.
We can help you draft restrictive covenants which are appropriate for your business sector and the status of the employee who is entering in to the contract to ensure that the restrictions are likely to be enforceable in light of the limitations set out in case law.