Restrictive Covenants

Covenants are contractual clauses that try to protect the employer’s business interests by preventing employees from damaging the business after they leave (e.g. by working for a competitor or poaching staff or customers).

If the restrictive covenants are too widely drafted so that they just stop the employee from working somewhere else without really protecting lawful business interests, they will be invalid and cannot be enforced as being in restraint of trade and against public policy. However, if they are only what is reasonably needed to protect the employer’s lawful business interests, they can still be enforced. When deciding whether a covenant is reasonable or not, the courts will look at the length and extent of the restriction.

Clauses may protect trade secrets and other confidential information, the Company’s client or customer base and the workforce, for instance:

Non-competition restrictions

These forbid the ex-employee from working in a competing business, usually in a particular geographic area or radius from their former workplace.

Non-solicitation covenants

These forbid the ex-employee to solicit specified business connections ­ clients/customers ­ or employees; in both cases they will have had dealings with and influence over the connections/employees which they could use to poach them away for the benefit of their new job.

Non-dealing covenants

These forbid the ex-employee to do business with customers or other business connections of the employer.