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taratill, Solicitor
Category: Employment Law
Satisfied Customers: 6428
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: 3 years ago.
Category: Employment Law
Expert:  taratill replied 3 years ago.

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

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.


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

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.

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.