For many employers, restrictive covenants are viewed as an important safeguard when key employees leave the business. They can provide valuable protection against the loss of customers and members of staff, and the sharing of confidential information.
However, a restrictive covenant is only effective if employers can demonstrate that the restriction protects a legitimate business interest and is reasonable in its duration, scope and application. A covenant that is outdated or drafted too broadly may be difficult to enforce, providing little protection when a dispute arises.
How long do restrictive covenants last?
There is no fixed statutory period for restrictive covenants in employment contracts in England and Wales, but time restraints must be reasonable. Their duration depends on what is reasonably necessary to protect the employer’s legitimate business interests.
In practice, many post-termination restrictions last between three and twelve months. The longer and wider the restriction, the more carefully the employer will need to justify it. Any restrictions lasting more than 12 months will usually only be justifiable in exceptional circumstances.
What are restrictive covenants?
Restrictive covenants are contractual clauses that limit what an employee can do during employment or, more commonly, after a contract of employment ends.
They are used to prevent former employees from joining competitors, approaching (soliciting) former customers of the ex-employer, poaching the ex-employers staff or dealing with former clients of the ex-employer even were they approach the ex-employee.
What types of restrictive covenants are commonly found in executive and senior employee contracts?
Executive and senior employee contracts commonly include non-compete clauses, non-solicitation clauses, non-dealing clauses and non-poaching clauses, and confidentiality obligations.
A non-compete restricts the individual from working for or establishing a competing business for a specified period. Non-solicitation prevents them from approaching (soliciting) former customers, clients or prospective customers.
Non-dealing goes further by preventing dealings with specified customers even if the customer makes the first approach. Non-poaching clauses restrict attempts to recruit former colleagues. Confidentiality obligations are often wider and may continue indefinitely, provided they protect genuinely confidential information rather than general skill and knowledge.
How do you prove that a restrictive covenant is enforceable?
A restrictive covenant restraining an ex-employee from working in a competing business or soliciting ex-clients is prima facies void as being in restraint of trade.
An employer is not entitled to protect themselves against competition as such; they must have a legitimate business interest to protect and show that the covenant goes no further than is reasonably necessary to protect it.
The employer bears the burden of proving enforceability. It must show, first, that the covenant protects a legitimate business interest and, secondly, that the restriction is reasonable in scope, duration and geographical reach.
Does the length of a restrictive covenant affect whether it will be upheld?
Duration is one of the key factors in assessing reasonableness. A shorter restriction is generally easier to justify. Longer restrictions, especially non-compete clauses, require stronger justification because they have a greater impact on the employee’s ability to work.
When is a restrictive covenant considered unreasonable?
A covenant is likely to be considered too broad and unenforceable if they restrict an employee more than strictly necessary to protect the employer’s legitimate business interests (such as trade secrets or client relationships) or prevent them from simply earning a living.
Examples include a non-compete that prevents work in any capacity for a competitor, a customer restriction that applies to all customers rather than those with whom the employee had personal contact with, or a geographical restriction that covers areas in which the employee did not do any business.
Restrictions may also be unreasonable if they apply to junior employees with limited access to confidential information or client relationships.
Balancing Business Protection and Employee Rights
Protecting legitimate business interests without overreaching
Employers should start by identifying the specific legitimate business interest they need to protect and make sure these are documented. Legitimate business interests include, but are not limited to:
- Protecting trade secrets and confidential information which, if disclosed, would cause significant damage to the employer.
- Protecting trade connections.
- Protecting the employer’s interest in maintaining a stable and trained workforce.
The clause must be no wider than necessary to protect the employer’s business interest.
The contract should distinguish between different types of restriction rather than relying on one broad non-compete. It is often more proportionate to use customer non-solicitation, non-dealing, confidentiality and garden leave provisions before resorting to a non-compete.
Does seniority of an employee matter when enforcing restrictive covenants?
Seniority matters because senior employees are more likely to have strategic knowledge, influence over important customer relationships, access to confidential information, and authority over key employees. A restriction that may be unreasonable for a junior employee may be justified for a director, partner-level employee or senior salesperson.
However, seniority alone is not enough: the employer still needs to show why the specific restriction is necessary to protect legitimate business interests.
What risks do employers face when including restrictive covenants?
If covenants are drafted too restrictively, the main risk is that they will be unenforceable, leaving the employer with no effective protection when it is needed most. Overly broad clauses can also undermine negotiations with departing employees and increase the likelihood of disputes.
Whilst a court will not usually re-write a clause to make it enforceable, the Supreme Court decision in Tillman v Egon Zehnder Ltd [2019] UKSC 32 is a useful reminder that courts may sever part of the clause and leave the remainder as an enforceable clause. Careful drafting at the outset is essential and clauses should be drafted in such a way so it can be severed such that the remaining clause is valid.
Managing Disputes and Breaches
What can employers do if they think an employee has breached a restrictive covenant?
The employer should act quickly but carefully. The first step is to review the contract, the employee’s role, the relevant restrictions, and any garden leave or confidentiality provisions.
It should assess the commercial risk and take legal advice before writing to the former employee, their new employer or relevant third parties. If urgent harm is likely, the employer may need to consider an interim injunction in the first instance.
What remedies are available?
The most common remedy, where damages are not an adequate remedy, is an injunction preventing the former employee from acting in breach of the covenant for the remainder of the restricted period. Interim injunctions are often the practical focus because the restricted period may expire before a hearing takes place.
The court may also order delivery up or deletion of confidential information, disclosure of relevant documents or information, and damages or an account of profits where loss can be proven.
Future-Proofing Contracts
How often should businesses review restrictive covenants?
Businesses should review restrictive covenants regularly. Roles and positions change over time.
If there is a dispute about whether a restrictive covenant is reasonable, the court will consider reasonableness at the time the covenant was included. With an employee who was junior at the time of joining, this can create risk for employers.
As employees become more senior, restrictive covenants may be more justifiable. When promoting employees, employers should look to negotiate new or updated or restated restrictive covenants.
As a general rule, employers should not assume that wording used at the start of employment will remain suitable years later.
Tailoring covenants to individual roles
Standard wording is often risky. A blanket restriction applied to all employees may be too wide for some and insufficient for others. Tailored covenants allow the employer to link the restriction to the employee’s actual duties, customer relationships, confidential information they hold and influence they have within the business.
This makes the restriction easier to justify and often more effective commercially, because it focuses on the real risks created by that employee’s departure.
How can legal advice at the contract drafting stage prevent disputes?
A solicitor can help identify the legitimate business interests that need protection, select the appropriate type of restriction, avoid common drafting pitfalls, and ensure the contract works alongside notice periods, garden leave, confidentiality obligations and intellectual property clauses.
Taking advice early is usually far less expensive than trying to enforce an overly wide restrictive covenant after an employee has already left.
Contact our solicitors
Restrictive covenants are only effective if they are enforceable.
Whether a restriction can be relied upon depends on careful drafting to ensure the covenant goes no further than what is reasonably necessary to protect the employer's legitimate business interests.
Our Partner-led employment law team can help you evaluate the enforceability of existing restrictions, manage potential breaches and ensure your contracts are drafted to protect your business interests. If you would like advice on introducing, updating or enforcing restrictive covenants, we're here to provide practical, strategic guidance tailored to your circumstances.
Our Solicitors in Action
- Assisted a company in the preparation of bespoke restricted covenants when onboarding a financial director.
- Our Dispute Resolution team have enforced restricted covenants to protect businesses after employees have reaffirmed the restrictions under a settlement agreement.
- Negotiated employees out of restrictions entirely under settlement agreements and also reduced the restricted period to something far more reasonable.
- Advised businesses on how to increase the enforceability of restrictions, advising on what is reasonable and what is unreasonable, based on their business needs, i.e. whether to take a commercial view and have a wider restriction that might not be enforceable against something tighter on which they are more likely to be able to rely on.
- Advised employees who are in breach of restrictions with a view to mitigating their circumstances and avoiding expensive court proceedings.
Key Contact
Paul Hennity
Employment Law Partner
Paul is a Partner in our Employment Law team, currently dividing his time between our Chester and Wirral offices.
