Published in association with
AN EMPLOYEE builds up valuable knowledge and contacts during the time that they work for you but your commercial interests may be vulnerable if they leave and go on to work for a competitor.
It is therefore prudent to take steps to protect confidential information, such as pricing strategies, bids or innovative research and to guard relationships with clients or suppliers that could be exploited to another business’s advantage.
“At the start of employment, employers often include restrictions, known as restrictive covenants, on what an employee can do with information and contacts gained during their employment,” said Sharon Hundal, a partner in the employment team with Borneo Martell Turner Coulston.
“However, even if a former employee could damage your business, there are limits on the restrictions that can be placed on them and how far you can prevent them from competing with you.”
Sharon looks at non-compete clauses, when they are binding, proposed changes to the law and how employers could deal with these changes.
What are non-compete clauses?
Non-compete clauses are one of a range of restrictive covenants that employers often include in a contract of employment. A non-compete clause is a wide prohibition on the departing employee from working for a competitor or setting up in competition with you.
When are non-compete clauses binding?
Courts will only enforce a non-compete clause if it is appropriately worded and reasonable. Otherwise, it is treated as a restraint of trade which unreasonably restricts your former employee from taking up new opportunities. This would not be enforced by a court as it is seen as anti-competitive.
Will the law change?
In May 2023, the government announced that it would change the law so that non-compete clauses could not last any longer than three months. There is currently no date for these changes to be implemented. To pre-empt this potential change, contracts being agreed now can also include other restrictive covenants, such as non-solicitation clauses along with garden leave and effective confidential information provisions.
How we can help
We can advise you and write enforceable provisions to protect your business when an employee leaves. We can advise you on whether existing contractual provisions are likely to be binding on the employee at the time they depart, or the risks of taking on an employee whose restrictive covenants from their last job are still potentially enforceable.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
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