This article was published in the September/October 2025 edition of London Business Matters.
An employee leaves your employment. Within two weeks, they’re sitting at a competitor’s desk, calling your best clients, armed with your pricing strategy and inside knowledge of your company. You might think your ‘iron-clad’ contract will stop them. However, unless your restrictive covenants have been thought through carefully and well drafted, you could find they’re not worth the paper they’re printed on.
Clauses such as non-compete, non-solicitation and event confidentiality terms protecting specific information after employment ends, can be vital in protecting your client relationships, know-how, and commercial strategy.
Restrictive Covenants are generally considered anti-competitive, and the law aims to balance the right to protect your business with an employee’s right to earn a living; only clauses that go no further than are ‘necessary’ will be enforceable.
What will a court look at?
- Legitimate business interests. The restriction must protect something genuinely valuable to your business, such as trade secrets, client connections, or workforce stability. Preventing competition for its own sake will not pass the test.
- Reasonableness of scope. Restrictions must be proportionate in terms of duration and geography.
- Tailored to the activity. Senior executives may warrant broader restrictions than junior staff. Generic ‘cut and paste’ clauses will often fail to persuade a court legitimate business interests that need protecting.
Common pitfalls
All too often, businesses rely on template documentation or blanket clauses that try to cover every eventuality. Overreach is dangerous; if even part of the covenant is too wide, the entire clause can be struck out.
Practical steps
- Be precise and define the information you are seeking to protect: name companies or the nature of a business which is competitive or territories which you wish to protect rather than using vague, sweeping terms.
- Audit at key stages: review restrictions when roles change or when broader access to business information is given.
- Consider garden leave: keeping a departing employee out of the market during their notice period can buy valuable time.
- Move fast: if you suspect a breach, prompt action is vital in demonstrating to a court the risks your business faces.
Properly drafted and well considered restrictive covenants are key in protecting business interests. Not giving them the time and respect they deserve will only see hard earned business advantages slip away to competitors.
To discuss the contents of this article, please contact Dipti Shah via the form below.
