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Ask taratill Your Own Question
taratill
taratill, Solicitor
Category: Employment Law
Satisfied Customers: 6307
Experience:  15 years experience of advising on employment law matters
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Is a covenant release fee in relation to a restrictive

Customer Question

Is a covenant release fee in relation to a restrictive covenant in a consultancy contract allowed?
What Is required for it to be allowed/used if needed in a consultancy contract ?
Submitted: 2 years ago.
Category: Employment Law
Expert:  taratill replied 2 years ago.
Customer:

Hello my name is ***** ***** I am happy to help you today. Can you please explain your situation in more detail?

JACUSTOMER-y1t3lqzn- : I have been given a draft agreement to use which has a non-dealing restrictive covenant. I wanted to prevent the consultants I use for my business, which I then supply to my clients for specialised IT services to be prevented to deal with my clients directly for 6 months after project ends. Which is fine. However, there is an exception which says ' unless consultant pays company covenant release fee'.
JACUSTOMER-y1t3lqzn- : Can I please have an answer asap. Thank you
Customer:

Hi sorry for the delay. There is nothing wrong with having a covenant release fee. It would have to be clear what the release fee is and in what circumstances it could be paid. I would say that this is fairly unusual though.

Customer:

If you require any further specific information please do ask.

JACUSTOMER-y1t3lqzn- : Where can I find more information on this? What should I specify in relation to the release fee payable and how much would reasonable? Thank you
Customer:

Do you have the option of having one or not or are you told there must be one by your employer?

JACUSTOMER-y1t3lqzn- : I am the one imposing this on the consultant I am using- so that I can protect my business customers
JACUSTOMER-y1t3lqzn- : Is it enough to say that they can request to be released from covenant by agreement in writing by payment of a fee no more £10,000. And I have right to refuse to release under these circumstances - no obligation to release by payment of fee. And must be agreed in writing after fee amount has been agreed.
Customer:

Yes that will be absolutely fine. I was concerned that the sum you were going to suggest would potentially put the clause at risk which. However that does seem to be an adequate sum to request.