A restrictive covenant can be a useful term for an employer in a contract of employment. You can use it to place limitations on your employee's ability to obtain employment with a competitor when they leave your current employ. However, if it is not drafted correctly it can be unenforceable.
Types of Restrictive Covenant
There are many different types of restrictive covenant, but the ones most commonly used are:
- restricting an employee from working for a competitor within a defined area
- restricting an employee from approaching or poaching your clients
- covenants preventing your employee from dealing with former clients or customers even if they approach the employee
- covenants preventing your employee from recruiting other employees from your business
Validity of Restrictive Covenants
Not all restrictive covenants will be enforceable. If they are drafted too widely your employee may be able to challenge them. Generally the more senior your employee's position within your company the more likely it is that your restrictive covenants can be enforced.
Seek Early Advice
If you have any doubts about whether you should include a restrictive covenant, or the scope of one, you should seek advice before finalising the contract. We can often provide fixed fee advice. This will be money well spent as it could save you thousands of pounds in lost business in the future.
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