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Clauses Preventing Employees from Competing with Former Employers

Clauses preventing employees from competing with former employers are often seen in Contracts of Employment. These clauses set out restrictions on the employee’s conduct after termination of employment and are usually referred to as restrictive covenants or post termination restrictions.

Examples of common restrictions which may be found in a Contract of Employment are:-

Such clauses are important as an employer will want to protect its business and customer contacts. We are often asked by employees and employers whether such clauses can be enforced.

The general rule is that restrictive covenants are only enforceable if they are reasonable. They must be no wider than necessary to protect the legitimate business interests (e.g. customers and staff) of the employer.  Such clauses must therefore be reasonable in scope (geographic area and time). The clause must be clearly expressed otherwise it will not be enforced. Such clauses are only likely to be enforced if the person involved could realistically harm the employer’s business if they left employment and the restrictions were not in place. Reasonableness is assessed at the time the Contract of Employment is signed and it is therefore important to keep the issue under review particularly when an employee is promoted.

We are also asked what can be done if such clauses are breached. An employer can claim an Injunction which is an Order of the Court requiring the employee not to do something. An employer can also claim compensation/damages if he has suffered financial loss which will often include an account for loss of profits or the profits made by the employee.

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If you wish to speak to one of our team about restrictive covenants and employment issues, then please get in touch. You can call us on 01323 727321 to arrange an appointment or please fill in the form below and someone will get in touch.

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Please note that this article does not constitute legal advice. You should always speak to a legal professional to discuss your circumstances and consider your options.