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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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Protecting Your Business: Are Your Restrictive Covenants Likely to Stand Up in Court?

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?

1. 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.
2. Reasonableness of scope. Restrictions must be proportionate in terms of duration and geography.
3. 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.

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Why U.S. Companies Need to be Prepared for UK Employment Law

Expanding into the UK: A Strategic Opportunity

As global markets continue to evolve, more U.S. businesses are looking to expand operations overseas; and the United Kingdom remains one of the most attractive destinations.

With a shared language, a highly skilled workforce and a strategic location deemed a gateway to Europe, the UK is an ideal launchpad for American companies seeking international growth. However, while the business environment may appear generally familiar, the legal and regulatory framework in the UK, particularly around employment law, can differ significantly from the U.S. system. For this reason, it is essential for any U.S. businesses entering the UK market to seek early guidance from experienced UK employment lawyers.

Key Differences in Employment Law

UK employment law places a strong emphasis on employee rights and protections. For instance, here in the UK, workers benefit from statutory entitlements including paid annual leave, statutory notice periods, redundancy pay, and protection against unfair dismissal. Many of these apply from day one of employment. Unlike the U.S. ‘at-will’ employment model, UK law places a key emphasis on employers following specific legal procedures when handling disciplinary action, grievances, redundancies, and dismissals. Therefore, failing to follow the various statutory processes can lead to legal claims, regardless of whether employers have just cause to discipline or terminate an employee’s employment.

Legal Reach Beyond Borders

Additionally, the reach of UK employment law can extend beyond borders. For example, sexual harassment protections apply even if the parties involved are located in different countries. A UK-based employee subjected to inappropriate behaviour from a colleague overseas could bring a claim under UK law. Employers can be held vicariously liable unless they have taken all reasonable steps to prevent such conduct, including providing training and enforcing clear policies.

Laying the Groundwork for Compliance

Early preparation is essential when establishing a UK presence. From the outset, U.S. businesses should ensure employment contracts (required from day one of employment), HR policies, and internal procedures complaint with UK law are in place. This proactive approach not only reduces legal risk but also sets the tone for a healthy workplace culture.

The Importance of Due Diligence in Acquisitions

Moreover, when entering the UK market through the acquisition of an existing business, it is critical to conduct a full employment law audit. Without proper due diligence, U.S. companies risk inheriting non-compliant practices, unresolved disputes, or hidden liabilities that could result in costly claims or operational disruption.

Legal Guidance: A Strategic Advantage

Involving UK employment lawyers at an early stage helps ensure a smooth, compliant entry into the UK market (whether this is through organic growth or acquisition) while protecting both the business and its workforce.

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