Will a restrictive covenant protect your business?
Increasingly, businesses are considering the use of restrictive covenants to protect themselves from ex-employees soliciting customers or staff, post-employment. Restrictive covenants can be useful tools and are usually written into an employee’s contract of employment, restricting an employee using:
- Non-compete clauses, which stop the employee from joining a competitor company, usually for a specified number of months.
- Non-poaching covenants, which prevent the employee from poaching other employees.
- Non-solicitation covenants, which prevent the employee from contacting or enticing the business’ clients or customers away from the business.
- Non-dealing covenants, which prevent the employee from having any dealing whatsoever with the business’s clients and customers, including acting on any independent approaches by the client or customer.
Employers wishing to include restrictive covenants in their employees’ contracts should take care drafting the provisions as there are strict rules about their reach and scope, such as the length of time the restrictions should last, and the geographical range of the restriction. Should a covenant be too broad it may be deemed invalid.
Before an employee leaves, the company should make the employee aware of contractual restrictions and once the employee has left, the business may monitor the former employee’s behaviour online to make sure they have not moved to a competitor nor attempted to contact any clients or customers.
If a breach has occurred, the business must act quickly to prevent the breach from continuing and to stop any losses from increasing. First, it is important to write to the former employee reminding them of their restrictive covenants (enclosing a copy of the relevant documents), raise the concerns, provide them with evidence and request that they stop all infringing activity immediately.
If the former employee is found to have breached their covenants, there are several options available to the employer, including seeking damages, making legal undertakings and raising injunctions.
If you have any concerns relating to the strength of your contractual clauses contact us at email@example.com