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
- 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.
- Non-solicitation: prevents the employee from approaching the organisation’s customers, clients or suppliers after they leave.
- Non-dealing: prevents the ex-employee from working with your clients, even if the client initiates contact.
- 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 required not to attend the workplace, or engage with clients, customers or colleagues.
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.
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