Restrictive Covenants in Employment

The main types of post-termination restrictive covenants found in employment contracts are:

• Non-competition: Prevents you from working for a competitor or setting up a competing business for a specified period after leaving.
• Non-solicitation of clients: Prevents you from approaching clients you dealt with during employment to take their business to your new employer.
• Non-dealing with clients: Broader than non-solicitation — prevents any business dealings with former clients, even if they approach you.
• Non-solicitation of employees: Prevents you from recruiting former colleagues to your new employer or business.
• Confidentiality: Prevents use or disclosure of the employer's confidential information (this applies even without an express clause).

Each type of covenant is assessed differently for reasonableness. Non-competition covenants are the hardest to enforce because they are the most restrictive of your freedom to work.

A restrictive covenant in an employment contract is only enforceable if it:

1. Protects a legitimate business interest — for example, trade secrets, confidential information, or stable client relationships
2. Goes no further than reasonably necessary to protect that interest — in terms of duration, geographic scope, and activity restricted

Courts assess enforceability at the time the covenant was entered into (usually at the start of employment) and at the time of breach. A covenant that was reasonable when signed may become unreasonable if your role changed significantly during employment.

Factors that courts consider include:

• The length of time — six to twelve months is commonly accepted for senior roles; longer periods are harder to justify
• Geographic scope — a worldwide non-compete for a regional sales manager is likely to be too wide
• The scope of restricted activities — blanket prohibition on working in an entire industry is usually too broad
• Your seniority and access to confidential information or client relationships

If your employer threatens to enforce a restrictive covenant, do not simply ignore it — take legal advice immediately. Options include:

• Assessing whether the covenant is actually enforceable in its terms — many are wider than is legally justifiable
• Checking whether the employer's own breach of contract (such as failing to pay notice correctly) has released you from post-termination obligations
• Negotiating with your employer — in many cases employers are willing to reduce or waive the covenant in exchange for a settlement
• Defending any injunction application in court if your employer seeks to restrain you

Breaching a covenant that a court later finds enforceable can result in an injunction (stopping you in your tracks), damages (compensation to the employer for losses caused), and costs. Your new employer could also be liable if they induced the breach. Take this seriously and always seek legal advice before breaching a covenant.

When an employer believes a former employee is breaching a restrictive covenant, their most common remedy is to apply to the court for an interim injunction. This is a temporary court order — obtained on an urgent basis — requiring the employee to stop the allegedly infringing conduct until the case can be fully heard. The employer must establish that there is a serious question to be tried, that damages would not be an adequate remedy, and that the balance of convenience favours granting the injunction.

Interim injunctions are taken seriously: a breach of an injunction is contempt of court, which can result in a fine or imprisonment. If you receive correspondence threatening injunction proceedings, you should take specialist legal advice within 24 to 48 hours.

In practice, many covenant disputes are resolved through negotiated settlements rather than full litigation. A settlement agreement counterproposal is a common approach — the former employee (or their solicitor) writes to the ex-employer proposing modified covenant terms that the employee can comply with while still taking up their new role. For example:

• Reducing the duration of a non-compete from 12 months to 6 months
• Narrowing the geographic scope from nationwide to a specific region
• Limiting the restriction to named competitors rather than the entire industry
• Accepting non-solicitation of named key clients in exchange for freedom to compete generally

Employers often accept such counterproposals because litigation is expensive and uncertain. Your new employer may also have a legal interest in supporting negotiations, particularly if they risk being joined to the proceedings for inducing breach of contract. Engage your new employer's HR or legal team early if you face a covenant threat.

One important point that employees sometimes overlook: if your former employer dismissed you in breach of contract — for example, by failing to pay you the correct notice — this may have released you from your post-termination obligations, including restrictive covenants. The principle is that a party who commits a repudiatory breach of contract cannot then enforce the other party's obligations under that contract. However, this analysis is highly fact-specific and courts apply it narrowly. Do not assume you are free from covenants simply because you were dismissed — take legal advice on whether the breach was sufficiently serious to constitute a repudiatory breach that releases you. The Employment Rights Bill 2024 did not change the common law position on restrictive covenants, which remains governed by contract law rather than statute.

Where covenants are found to be overly broad, courts have the power to apply the doctrine of severance — blue-pencilling out the unenforceable portion while leaving the remainder intact. This means that even a poorly-drafted covenant may be partially enforced if a court can remove the offending words without fundamentally altering the nature of the restriction. As a result, employees should not assume that a clause is simply "too wide to enforce" without taking legal advice on whether a court would sever and enforce the narrower core. The practical implication is to treat any covenant clause — however broadly worded — with caution, and to obtain specialist employment law advice before proceeding to a new role.