18th January 2024 | Aaron Heslop | Employment, Dispute Resolution, Restrictive Covenants

Following the Christmas break, with resolutions still fresh in employees’ minds, the start of a new year is traditionally the time when employees across the country begin to make moves to find new job opportunities. Whilst taking this exciting new step in your career journey, it’s crucial to consider how restrictive covenants in employment contracts could impact where you go next.

Moving job should be a straightforward matter, but many employees either don’t have a copy of their most recent employment contract or fail to review it before embarking on their job hunt.

What are restrictive covenants?

Restrictive covenants in employment contracts are legal clauses crafted to protect an employer’s business interests by limiting an employee’s actions during or after their employment. Common types include non-compete agreements, non-solicitation clauses, and confidentiality agreements. 

This can have a significant impact on an employee’s job hunting by restricting: 

  • where they can work
  • who they can approach for business
  • how they use knowledge gained from their previous role

Key restrictive covenant clauses to watch out for

A well drafted employment contract will typically contain the following suite of post-termination restrictions:

Non-compete –

These clauses are inserted to prevent the employee from working for a direct competitor of their employer. A well drafted clause will normally define what is meant by a direct competitor. These clauses may even go further and say that an employee cannot set up on their own and work in competition. (Check out the government website for more details)

Non-solicitation clauses –

A clause of this type will be included in the employment contract where the employer wishes to protect against its clients and contacts from being enticed away to work with the employee somewhere else. This helps safeguard valuable business relationships.

Non-poaching clauses – 

This clause is designed to deter the employee from encouraging their former colleagues to leave their employment and join them in a new venture. This is focussed on maintaining team stability in the original company.

Non-dealing clauses –

This restriction is sometimes inserted to widen the effect of the above covenants, so that a departing employee is prevented from soliciting or poaching, but also that they cannot even deal with /or have contact with the people defined in those clauses.

Confidentiality clauses – 

This is an ongoing restriction that carries on in perpetuity. If well drafted, the clause will contain a concise list of information that is considered to be confidential and should not be utilised in any way by the employee.

Employers should also use that meeting as an opportunity to remind a departing employee of their ongoing obligation of confidentiality and any restrictive covenants they are subject to. Collectively these obligations are commonly referred to as post-termination obligations.

Action points for employers and employees

For Employers:

Conduct exit interviews: This is an opportunity for the employer to run through a checklist of items that a leaver needs to deal with before they depart e.g. returning company property, handover of work. Ensure departing employees understand their post-termination obligations. Provide written confirmation of these restrictions.

Review contracts: Regularly review employment contracts to ensure they include well-drafted and enforceable restrictive covenants in case of the event that an employee leaves the company.

Seek legal advice: Consult legal professionals to address breaches, update contract terms in line with current business needs or to enforce legal compliance from your employee.

For Employees:

Review your contract: Familiarize yourself with the restrictive covenants in your employment contract before pursuing a new job.

Seek clarification: If you’re uncertain about any terms, request clarification from your employer in writing so clauses are clearly defined and are not ambiguous or open to interpretation.

Get legal support: Consider consulting an employment solicitor to understand how restrictive covenants may impact your job search or new role.

If you’re an employer and you’ve discovered that an employee has left and is now acting in breach of their contract or you’re an employee that’s now being pursued by your former employer, please contact Aaron Heslop for a no obligation discussion.

Furthermore, if you’re looking to review your existing employment contracts, we would recommend a discussion with our Employment Team.

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