RESTRICTIVE COVENANTS IN EMPLOYMENT CONTRACTS

More New Year’s Resolutions?

It is that time of year again, the end of the festive season, when a great number of us begin to re-evaluate our lives generally and contemplate how best to improve ourselves by way of ‘new year’s resolutions’. Resolutions which we hope will lead to a healthier lifestyle, improved emotional wellbeing, increased financial independence etc. Amongst other things, this can mean giving up smoking, starting a new fad diet or even changing employment. Whilst we are admittedly not best placed to assist with the former, we can certainly advise on the latter.

Anyone Changing Jobs?

One way we assist you as an employer is by pre-emptively incorporating restrictive covenants into your employees’ Contracts. Restrictive covenants are clauses which restrict the post-employment activities of employees, for a specified period, after their employment has ended, with the purpose of protecting the interests of your business. These clauses should ideally be included in your Employment Contracts at the outset for new employees but they should also be revised to reflect changes later on in the employee’s responsibilities and status, such as a promotion, or the clauses may not be enforceable when you do look to rely on them.

Critical restrictive covenants, which are often either missed out entirely, or just not fleshed out with sufficient detail, include the following:-

- non-competition covenants – these restrict ex-employees from undertaking the same or similar work in competition with the employer;

- non-solicitation covenants – these prevent ex-employees from poaching the employer’s critical contacts, such as clients or suppliers;

- non-dealing covenants – these prevent ex-employees from dealing with the employer’s critical contacts, similar to non-solicitation, but would apply irrespective of who makes contact with whom; and

- non-poaching covenants – these prevent ex-employees from encouraging other members of an employer’s staff to leave, to join the ex-employees to work for them or for their new employer.

The above list is non-exhaustive but merely provides an indication of some of the more common types of unwanted ex-employee behaviour that a properly drafted Contract of Employment can be used to curtail once it has begun or better still prevent.

An employer’s chances of preventing this type of behaviour, or putting a stop to it once it has begun, will depend very much on the quality of the drafting of these critical clauses in the employees’ Contracts of Employment.

A determination should be made of the exact nature of the Employment Contract clauses most suitable for your business, looking specifically at your individual commercial needs. Where employees are changing jobs both employers and employees should also look closely at the notice provisions in the Contracts of Employment, as well as any restrictive covenants, any training fee recoupment clauses, confidentiality clauses etc. and at the provisions of any share option agreements.

New year’s resolutions aside, it is a great time to review your Contracts of Employment and the best time to seek advice if you suspect your employees are about to jump ship.

Please do contact our Employment and Dispute Resolution Team on 0207 821 8211. We will be happy to help.

 

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