Restrictive Covenants

Including restrictive covenants in its employment contracts can provide important protection for your business.  They help ensure that valuable clients, contacts, staff and information are not easily lost should a key employee move to a competitor business.

A case reported in July 2008 at the High Court is another reminder that restrictive covenants must be clearly worded, accurate and go only so far as is considered reasonable to be enforceable.

Despite an employee leaving his job, taking his Rolodex containing dozens of business cards and sending an e-mail to all of his contacts announcing his move to a competitor business, the Court found the restrictive covenants in his employment contract were unenforceable by the former employer because they were too wide in scope.

Had the restrictions been drafted correctly, the former employer could have prevented the employee (and his new employer) from dealing with any of the employee's former contacts.  It could also seek payment from the new employer of any profit made from breach of the restrictions.  The business therefore either retains its valuable contacts and all associated future revenue or recovers any loss of profit it has suffered.

Employers should consider whether new or existing employees have the potential to adversely affect its business should that employee leave to work for a competitor.  If so, the employer should introduce restrictive covenants into the employee's employment contract.

Careful legal advice is needed to ensure restrictive covenants will be effective.

If you require advice on the drafting of restrictive covenants and/or the ways in which they can be introduced into employment contracts please contact Mark Daubney on 01482 324591.

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