No matter the industry your business operates in, you will have unique information that contributes to the success of your company.
An employee with knowledge of your internal processes, business strategies, and contacts can be highly attractive to competitors looking to gain an advantage.
Although implied contract terms offer some protection for employers during the employee’s period of employment, restrictive covenants within employment contracts provide protection once the employment has ended.
That said, if a restrictive covenant is reasonable and drafted precisely, it can be effective in limiting the damage caused to your UK business by employees leaving.
What Are Restrictive Covenants In Employment?
In short, restrictive covenants are clauses in employment contracts that aim to prevent employees from acting unfairly in competition with you by exploiting your information and business contacts.
Including restrictive covenants in employment contracts helps prevent former employees from passing on and using vital information and exploiting their previous company’s customers and connections.
Now that you have a better understanding of restrictive covenants in the UK, let’s break down the different types of restrictive covenants you should be aware of as an employer.
Types Of Restrictive Covenants
Types of restrictive covenants include but are not limited to:
- Non-competitive covenantsÂ
- Non-dealing covenantsÂ
- Non-solicitation covenants
- Non-poaching covenantsÂ
- Non-employment covenantsÂ
1. Non-Competitive CovenantsÂ
The first type of restrictive covenant is a non-competitive covenant.
As the name suggests, non-competitive covenants prevent former employees from working for one of your competitors.
This type of covenant also restricts former employees from setting up a competing business.
This type of covenant is more likely to be enforceable if there is confidential information that cannot be protected by confidentiality provisions and other restrictions in an employee contract and there is a significant risk that the employee could exploit the information if they joined a competitor.
2. Non-Dealing CovenantsÂ
Non-dealing covenants prevent any association between your clients and a former member of staff during the period of restriction.
This covenant prevents former employees from providing goods or services you provide to your customers.
It’s important to note that non-dealing covenants apply even in circumstances where the former employee doesn’t initiate contact.
3. Non-Solicitation Covenants
The next type of restrictive covenant is a non-solicitation covenant.Â
This type of covenant restricts former employees from approaching clients, customers, or prospective clients once they have moved to a new business or are setting up their own company.
If you’d like to include a non-solicitation covenant when drafting your employment contracts, our specialist employment solicitors at Harding Evans can help.
Contact us today to learn how we can assist you by emailing us at hello@hevans.com.
4. Non-Poaching CovenantsÂ
Another type of restrictive covenant to be aware of as an employer is a non-poaching covenant.Â
In short, non-poaching covenants restrict former employees from approaching previous colleagues to move to their new employer or business.
Generally speaking, non-poaching covenants are easier to enforce than non-employment ones, leading to our next point.Â
5. Non-Employment CovenantsÂ
Lastly, employers should be aware of non-employment covenants.Â
This covenant prevents former employees from employing members of your workforce when they leave.
Non-employment covenants can protect the stability of your workforce but are more challenging to enforce, so it’s recommended that you seek legal advice from specialist employment law solicitors.
Additionally, this type of covenant is generally limited to restricting the employment of senior staff, although if you have a small business with few employees, it could be reasonable for you to restrict a former employee from employing any staff members.
What Is Garden Leave In The UK?
In short, garden leave refers to the period of time when an employee leaves a job but remains on the payroll and is not permitted to work anywhere else.
Garden leave is a type of clause that thus allows the employer to suspend the employee on full pay during some or all of their standard notice period to keep the employee away from the workplace.
Under garden leave, employees are prohibited from working for the competition or for themselves.
Are Restrictive Covenants Enforceable?
In short, yes, restrictive covenants can be enforceable if they’re reasonable and drafted correctly.
As such, you could take an employee to court in the UK if they breach the restrictive covenants in their employment contract. That said, the scope of the restrictions mustn’t be broader than the employer reasonably needs to protect its legitimate business interests.
Bearing this in mind, it’s always best to seek expert legal advice to ensure that any restrictive covenant is enforceable.
How We Can Help
Our expert employment solicitors at Harding Evans can help to ensure that the restrictive covenants you include in your employee contracts are realistic in terms of timescale, geographical scope, and the extent to which you’re protecting your business interests.
If your employees act improperly during or after the course of their employment, our team can take swift action to enforce the terms of the contract of employment.
Get in touch with a member of our team today.
