Non-compete clauses: Can they be enforced?
Restrictive covenants in employment contracts are clauses that try to restrict the activity of an employee after they have left the employer’s employment, and usually focus on four areas:
- Non-solicitation of customers – stopping an ex-employee approaching customers
- Non-dealing with customers – stopping an ex-employee dealing with a customer even where the customer approaches them
- Non-poaching of staff – stopping an ex-employee recruiting staff from the employer
- Non-compete restriction - stopping the ex-employee working in that industry and competing with the employer
The non-compete clause is the most restrictive of these types of clauses, but they can still be enforced by employer when an employee leaves provided that the clause goes no wider than is necessary to protect the legitimate business interests of the employer.
Some tips for maximising your chances of covenants being enforced
- Keep them under review. The reasonableness of the clauses are assessed at the time that they are entered into: so even if you promote an employee, the court looks at when they signed the contract.
- An unreasonable clause is unenforceable: so consider carefully what protection you really need rather than use every type of covenant available and making the length of time as long as you dare. If it’s unreasonable, it’s unenforceable.
A well drafted restrictive covenant that is reasonable will be enforceable, and can be key in protecting hard won client relationships.
Greg Hollingsworth is a litigation solicitor who represents businesses and individuals involved in disputes relating to non-compete clauses.