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Restrictive Covenants: How Employers Can Protect Their Business Interests

In a competitive market the departure of a key employee can put a company’s most valuable information and assets at risk. From confidential material to trusted client relationships, the loss can be significant, and in some cases, irreversible.

Restrictive covenants remain one of the most effective contractual damage limitation tools. However, the law is applied strictly; a clause will only be enforceable if it is reasonable, proportionate, tailored to the individual, and justified by genuine business requirements. With anticipated legislative changes, now is the time for employers to review and strengthen these protections.

What Are Restrictive Covenants?

A restrictive covenant is a contractual term limiting certain activities by the employee after employment ends. Only a narrow range of interests can be legitimately protected, including client connections, confidential information, trade secrets and workforce stability.

The purpose is not to block fair competition, but to prevent unfair advantage gained through access to the employer’s resources and relationships. This distinction matters – restrictions with no clear link to a legitimate business interest are unlikely to be enforceable. If a clause exists solely to prevent a former employee from working elsewhere, it will almost certainly fail.

Restrictive covenants are part of a broader toolkit for protecting business interests. Other measures, such as intellectual property clauses, clear policies on data security, and exit interviews, complement these contractual protections.

Main Types of Post-Termination Restrictions

1. Non-compete: prevents the employee from working for a competitor or starting a competing business for a defined period. These are the most difficult type of restriction to enforce and face the highest judicial scrutiny.
2. Non-solicitation: prevents the employee from approaching the organisation’s customers, clients or suppliers after they leave.
3. Non-dealing: prevents the ex-employee from working with your clients, even if the client initiates contact.
4. Non-poaching: prohibits the employee from enticing or encouraging current staff to join them in a new venture or competing business.

Confidentiality obligations apply both during and after employment, operating alongside post termination restrictions. They can be a stronger legal foundation because they are not subject to the same time limits. However, once employment ends, only trade secrets remain automatically protected, so an express confidentiality clause is needed to cover wider information.

In practice, businesses often combine different restrictions. For example, a senior sales executive may be a subject to a non-compete clause of limited duration, a non-solicitation clause covering key clients, and ongoing confidentiality obligations. Layering protections in this way improves enforceability and provides flexibility in the event that one of the clauses is challenged in court.

Are They Enforceable?

To be enforceable, a restrictive covenant must be reasonable in scope, duration and geography. There is no “one size fits all” approach. For example, a restriction suitable for a sales director may not be justified for a junior manager, even if they both work in the same department.

The restrictive covenant must go no further than is necessary to protect the specific commercial interest, such as safeguarding client relationships or protecting confidential know-how. It’s also important to bear in mind that enforceability is assessed at the time the covenant was agreed, not when the employee leaves. Therefore, it is important for employers to review and update restrictions after promotions or significant changes in role.

If a clause is found to be too broad, for example, covering clients the employee never dealt with or applying to an unreasonably wide geographical area, or lasting longer than necessary, a court may strike it out entirely rather than rewrite it.

Each covenant should therefore be tailored to the employee’s actual responsibilities and supported by a clear, evidence-based justification for its terms.

Anticipated Legal Changes

The government has proposed a statutory cap of three months on non-compete clauses in employment contracts. While not yet implemented, this change would require employers to place greater emphasis on the other types of restrictions, such as non-solicitation and garden leave provisions to maintain protection. Garden leave is a period during an employee’s notice when they remain employed and continue to receive salary and benefits, but are typically not required to attend the workplace and are often restricted from performing their normal duties, engaging with clients, customers or colleagues, or starting new employment with a competitor. 

The courts are also continuing to reinforce the importance of up to date, role specific drafting, particularly after promotions or internal restructures.

Why Should Businesses Review Existing Restrictions?

With legal reforms pending and enforceability challenges increasing, businesses are recommended to review existing clauses as an opportunity to:

• Identify gaps and areas of risk, particularly following promotions or change in job roles of individuals;
• Review too wide geographical areas or definitions and provisions that will stand up to scrutiny; and
• Ensure that all documentation reflects the employee’s current role and responsibilities, reducing the risk of disputes and strengthening enforceability in court.

The aim is not to exclude employees from the market indefinitely, but to preserve the core relationships, information and goodwill on which businesses rely.

To discuss the contents of this article, please contact our Employment team via the form below.

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The $100,000 Question: Why US Tech Needs a UK Base Now

When President Trump signed off on a $100,000 fee for every new H-1B visa petition last weekend, the ripple effect was immediate. Investors asked whether startups could still afford to bring in overseas engineers. HR directors scrambled to recalculate hiring budgets. And for global talents, the designers, coders and data scientists who have long seen Silicon Valley as the promised land the message was unmistakable: the United States is no longer the easy first choice.

The H-1B has always been political football, but this change marks something different. It transforms the cost base of hiring, and in doing so, it forces US tech firms to ask a bigger strategic question: where else can they build teams, attract world-class people, and still connect seamlessly with their American operations?

The answer, increasingly, is London.

Why London?

The UK has positioned itself, almost by accident, as the most natural hedge against US immigration volatility. Visa fees are not insignificant, but they are predictable. There is no lottery. A sponsor licence can be secured in weeks, and once you have it, visas for new hires can be processed just as quickly.

For companies used to rolling the dice each March on the H-1B lottery, that certainty is transformative. It means talent strategy can be planned rather than prayed for.

The timing also matters. London sits in the sweet spot between California and Bangalore, overlapping with both in a single working day. For distributed teams and round-the-clock development cycles, that time zone advantage is worth almost as much as a tax break.

More Than a Safety Net

It would be a mistake to see the UK only as a fallback for those priced out of the H-1B. The country has been quietly redesigning its immigration system with tech in mind.

The Skilled Worker route, while more expensive than it once was, offers stability and a path to settlement. The Global Talent visa endorsed by Tech Nation remains one of the most flexible unsponsored routes in the world. And the Scale-up visa is designed for precisely the kind of high-growth firms that usually cluster in San Francisco or New York.

Combine those options with London’s financial markets, venture ecosystem and cultural cachet, and the UK starts to look less like a Plan B and more like a genuine alternative centre of gravity.

The Cost Argument

The hard numbers tell their own story. Sponsoring a skilled worker in the UK involves licence fees, an immigration health surcharge, and the visa itself. For a five-year hire, the all-in cost is measured in the low tens of thousands of pounds. Compare that with a flat $100,000 fee before you even pay wages in the United States, and the business case begins to write itself.

The fee will not deter the largest tech companies, who can absorb it as a cost of doing business. But for mid-sized players and scale-ups the very firms most responsible for innovation and job creation it could be fatal. A UK office is no longer just a growth play, it is a survival strategy.

The Strategic Pivot

What we are seeing is a shift in mindset. For decades, the default was simple: if you wanted to scale in tech, you built in the US and dealt with immigration headaches as best you could. Now the calculation is different. A physical footprint in the UK is a release valve: a place to hire international talent without political whiplash, a platform to reach European markets, and a credible base that investors understand.

This does not mean abandoning America. The US market, capital and ecosystem are still unrivalled. But the smartest companies are already thinking in terms of dual anchors: Silicon Valley for scale, London for stability.

Conclusion

The $100,000 H-1B fee has turned a visa into a luxury product. For the companies who cannot justify that spend on every new engineer or product lead, the UK offers a rational, strategic alternative.

The firms that move early, incorporating, licensing, and embedding compliance in London will have a head start. They will be able to keep hiring globally while their competitors are paralysed by costs in the US.

The message is clear: if you are a US tech company serious about resilience, you no longer just want a UK presence. You need one.

Get in touch with our Corporate Immigration team via the form below.

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Gifting Intellectual Property in a Will

Whether Intellectual Property (IP) rights make up a major or minor share of the value of an estate, testators should carefully consider how they are gifted under their Will. It is essential to ensure that IP is properly identified, valued and transferred to beneficiaries on death.

What is Intellectual Property?

IP refers to many different types of legal rights and intangible assets. Some of the most common rights to consider in estate planning are:

• Copyrights – rights to original artistic, dramatic, musical and literary works lasting for 70 years after the death of the author/creator
• Patents – protection for inventions and innovative processes lasting for 20 years from registration
• Trademarks – distinguishing branding features that can be registered for a ten year period and renewed thereafter
• Design rights – protection for the appearance of a product, in whole or in part

These types of IP often generate income during the testator’s lifetime and after their death, typically through royalties and licensing, so should be considered in the process of drafting or updating a Will.

Key considerations when gifting IP in a Will

Identification

Any IP assets should be clearly identified in the Will or accompanying Letter of Wishes with details such as registration information, creation dates and any associated agreements (such as licensing arrangement) noted in the relevant document.

Any ambiguity could lead to disputes or delays in probate being granted and onward transfer to beneficiaries.

Asset management and choice of executor

IP rights often require ongoing management including renewing registrations, negotiating terms of licensing and dealing with any infringement issues. This should be considered when dealing how IP assets are passed down beneficiaries.

Some testators will choose to create a trust structure to administer the ongoing management of these assets. In certain circumstances this can help to preserve the value of the assets over time, but advice should be sought to determine if this is a suitable solution.

It is common to appoint specialist executors or trustees to manage these assets. This is a particularly important consideration when the testator’s IP generates significant income or is involved in complex commercial agreements.

Tax implications

IP assets are subject to Inheritance Tax so accurate valuation on death is fundamental. Valuation of these assets can be complex, particularly where multiple income streams are involved, so professional valuation may be required. It is also likely that there will be income tax considerations for beneficiaries and executors. Tax advice should be sought if necessary.

Conclusion

In summary, where a testator holds IP rights they should carefully consider how they would like to pass these assets to their beneficiaries. Proper identification and valuation of these assets is essential to ensuring that the administration of their estate can progress smoothly and without delay.

Obtaining tax and estate planning advice helps to ensure that these assets are protected and preserved when being passed down to beneficiaries.

To discuss the contents of this article, please contact our Private Wealth & Tax team via the form below.

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