For most employees across all sectors, the old adage of a ‘job for life’ is long forgotten. People move around between companies as they climb the career ladder – particularly if they are good at what they do!
Many businesses thrive on the relationships that their staff build with customers – so how do you make sure that when one of your star networkers hands in their notice, they only take their leaving bouquet, bottle of fizz and favourite coffee mug with them?
Losing a client is never an easy experience – but it’s all the more devastating if they transfer their custom to your former employee in their new role. This is where restrictive covenants can help.
What are restrictive covenants and should I use them?
Restrictive covenants are sometimes part of a contract of employment. They may also appear in staff handbooks, or in letters when offering someone a job.
This document is there to prevent an employee from competing with their former company after their employment ends. It can stipulate that they cannot work for a competitor, for a stated period of time, or deal with that company’s existing clients.
It may include a confidentially clause forbidding that person to share commercially sensitive information that could harm the company, or offer another business an advantage. It may also prevent the leaver from trying to recruit – or poach – more of your treasured team to their firm.
Are restrictive covenants enforceable in the UK?
Restrictive covenants are enforceable, even in a redundancy situation, but a company may have to take their former employee to court to get a satisfactory resolution.
For a covenant to be upheld by a court, it must be meticulously drafted. Hastily written, DIY versions of such documents may not meet requirements – and a judge may dismiss a covenant that is unreasonable or even just ambiguous in its demands.
A restrictive covenant can only be valid if it protects legitimate business interests and does not go further than is necessary to achieve this, in terms of both geographical scope and timescale stipulated, which would not normally be for more than 12 months.
Whether the employee received a benefit in return for signing such an agreement, and the seniority of their role, may also be factors in the court’s decision on whether to uphold it.
What do restrictive covenants mean for the employee?
The implications of such restrictions may be the last thing on a new staff member’s mind as they race through all the necessary forms to get started – but they can severely limit that person’s options when they are looking for their next career step.
If in doubt, take legal advice before signing – though employers can withdraw job offers if candidates do not agree to the terms.
Anyone tempted to ignore a restrictive covenant while pursuing a new vocational challenge should also take legal advice or risk, being brought to court and handed an injunction!
Can you employ someone with a restrictive covenant from a former job?
As an employer or HR professional you may find yourself on the other side of the fence, offering a job to someone who is the subject of a restrictive covenant.
Our advice is to tread carefully, because new employers, as well as the employee in question, can be sued. This is not least because the organisation is likely to have more money than the individual.
Conduct due diligence when recruiting, particularly from competitors. Be aware of, and confident that you fully understand, any restrictions. Make sure you do not do anything in setting tasks for the recruit that could be seen to allow or even induce a breach.
Finally, ask a lawyer for assistance – those upfront costs could save you a lot more money in the long run!