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Post-Termination Restrictions
Departing employees are often well-placed to take advantage of confidential information, strategic plans, customer and client details, or other information about their employer’s business after the termination of their employment. They may attempt to use this information for the benefit of a new employer or to set up a rival business, which could seriously harm their former employer’s business.
Types of Restrictions
Restrictive covenants are clauses that aim to prevent former employees from competing with their former employer’s business for a certain period after an employee has left the business. They can also prevent former employees from soliciting or dealing with the clients, customers, or suppliers of the business for a specified period after they have left. The most common types are:
- General Confidentiality: This prevents your employees from divulging sensitive information about your business or your clients.
- Non-Solicitation: Employees are not allowed to approach your existing clients, suppliers, or staff even after their employment has ended.
- Non-Dealing: This restricts employees from accepting business from your existing clients after they have left your business. This is particularly useful if you are concerned that your clients might try to ‘follow’ your most valuable employees if they join a competitor or start their own business.
- Non-Compete: This clause is designed to prevent former employees from working in direct competition with you – either on a self-employed basis or with another company in the same industry.
Legal Compliance and Considerations
When enforcing a restrictive covenant, the court must consider the doctrine of restraint of trade. The contractual term restricting an employee’s activities after termination is void for being in restraint of trade and contrary to public policy unless the employer can show that:
- It has a legitimate proprietary interest that is appropriate to protect.
- The protection sought is no more than reasonable, considering the interests of the parties and the public interest.
The court can order an injunction against the employee or make a financial award if the business has made a loss due to a breach of any restrictive covenants.
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Our Recent Cases
- Drafted post-termination restrictive covenants for a senior executive at a technology company.
- Advised on the enforcement of non-compete clauses for a financial services firm.
- Successfully obtained an injunction against a former employee who breached a non-solicitation clause.
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Associate Solicitor, Employment
Associate Solicitor, Employment
Partner, Employment
Partner, Business Immigration
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