Gemma Irvine, HR Lead, HR People Support Ltd
Restrictive Covenants often form a generic part of the Contract of Employment, but there is a mystery around how they are used and how enforceable they are.
What are Restrictive Covenants?
Restrictive Covenants are clauses that form part of the contract of employment which work as post-termination restrictions on employees as they leave employment. They are used to protect the legitimate interests of the business from leavers, either taking information or documentation (considered intellectual property) with them, potentially poaching other staff or even clients/customers.
Non-compete clause safeguards against setting up a directly competitive business, within a specified time frame, and/or a location radius.
Non-solicit clause safeguards against leavers attempting to poach or coax current employees to work with them in new employment, to utilise the breadth of skills and knowledge.
Non-deal clause safeguards against the attempt to poach or coax current clients to work with them in a new capacity. This clause is most often relied upon in sales or commission-based roles, where the relationships are built with individuals so the risk of losing clients is higher as they leave employment.
The Myth?
Often Restrictive Covenants are deemed unenforceable, however from a court room perspective, they just need to be reasonable. A judge will look at restrictions and take a view as to whether they are too restrictive on future employment opportunities for the employee.
They are there to be used as protection for the business, but that means looking in detail regarding the restrictions that are reasonable, and necessary to protect the legitimate interest of the business, without restricting the future employment of the employee.
How do I use them to protect my business?
Restrictive covenants should be reasonable, and fair. They are best used in conjunction with garden leave provision. This allows for the protection of the business to ensure leavers do not take information or documentation with them, or cause harm to the business during their notice period, whilst also having them remain employed in time, should you need to glean vital handover information.
Any time restriction that is placed in a covenant, will include the time spent on garden leave. Once an employee resigns, and is placed on garden leave, the restriction of 6 months will be effective from that date, rather than from the end date of employment following the notice period.
If you would like to discuss how we can help you protect your business, or for a FREE review of your contract, speak to one of our HR Consultants today on 01242 254466 (www.hrpeoplesupport.co.uk)