Thank you. It is a rather common occurrence for employment contracts to contain post-termination restrictive covenants. An employer would understandable want to protect their business from a departing employee's knowledge of confidential information, business connections, influence over clients, suppliers, staff, etc. However, a covenant that restricts an employee's post-termination activities will be automatically unenforceable by being in restraint of trade, unless the employer can show that it was there to protect a legitimate business interest and did so in a reasonable way.
The first thing to consider is what legitimate business interests (LBIs) can the employer try and protect? The most common ones are:
· Goodwill (trade connections with customers and suppliers)
· Trade secrets and confidential information
· Stability of the workforce (preventing poaching of employees)
If they are trying to protect an LBI, any relevant restriction must be drafted no wider than is reasonably necessary to protect that interest. Generally, the courts would try and balance the interests of the employer's business and the employee’s right to freedom of movement and to earn a living.
Non-competition covenants - prevent an employee from working with a competing business or setting up to work in competition with their ex-employer. A covenant simply wishing to prevent competition will not be enforceable. However, a non-competition covenant trying to protect an LBI can be. Such covenants will generally only be reasonable if in the process of working in competition, the employee uses trade secrets or sensitive confidential information belonging to their ex-employer, or their influence over clients is so great that such a restriction is necessary. If these covenants include a geographical area, their enforceability will also depend on the area they are trying to cover, such as density and population and what is considered reasonable in the circumstances.
So whilst restrictive covenants are often used as a scare tactic by employers, in reality they can be difficult to enforce and just because they want to put off others from leaving, if LBIs as above are not seriously affected, it is unlikely a court would deem them enforceable.
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