Leading Immigration Lawyers With Over 9000 Applications Approved
Call +44 (0)333 414 9244 | Mon - Sun, 8.30am -6pm

Restrictive Covenants in Employment Contracts

You may have signed an employment contract that can limit your professional growth even after leaving the job. Therefore, clearly understanding restrictive covenants in employment contracts is vital for individuals looking to navigate the job market successfully.

For more information about why employers use restrictive covenants, the types of restrictions they can impose, and what you can do if you find yourself bound by one, get in touch with one of our advisors today. Call IAS on 0333 305 9375 or contact us online.

reviews-io

Overview of Restrictive Covenant in Employment Contracts

Restrictive covenants, also known as negative covenants, are terms or conditions included in an employment contract that can limit an employee’s ability to work (unlike positive covenants) in the same industry or with competitors for a certain period after leaving their job.

For example, a non-compete clause of a restrictive covenant prohibits an ex-employee from working for a competitor or starting a competing business for a certain period after leaving their current job.

Types of Restrictive Covenants

Several types of restrictive covenants can be used in employment agreements.

1.  Non-competition Covenants

A non-competition covenant is a type of restrictive covenant that prohibits a former employee from working in similar employment for a competitor, often within a particular geographic area for a specified period.

These are considered the most restrictive type of covenants. The purpose of such clauses is to protect a legitimate business interest such as client connections, confidential information or a stable workforce.

2. Non-solicitation Covenants

It is a type of restrictive covenant that prohibits a former employee from soliciting the former employer’s current, prior or prospective clients for a specified time.

The purpose of a non-solicitation clause is to protect the employer’s customer relationships and goodwill.

3. Non-dealing Covenants

A restrictive covenant of this type prevents a former employee from dealing with former clients/customers/suppliers of the former employer, regardless of which party approached the other.

This means that even if a former client/customer/supplier initiates contact with the former employee, the employee is still prohibited from dealing with them.

4. Non-poaching Covenants

A non-poaching covenant is a rule in some employment agreements that stops ex-employees from asking their former employees to work for a competitor. The idea is to keep the employer’s workers safe and prevent them from leaving to work for someone else.

5. Confidentiality Agreements

A confidentiality agreement is a restrictive covenant that prevents former employees from disclosing or using their former employer’s proprietary or confidential information (such as trade secrets) or that of their employer’s customers.

The information doesn’t have to be a “trade secret” to be protected. It just has to be simply confidential and not available to the public. Confidentiality agreements can be standalone agreements or can be included as part of an employment agreement.

Enforceability of Restrictive Covenants

The enforceability of restrictive covenants will depend on various factors, such as the employee’s position in the company and the type of restriction being imposed.

The following are the key points in understanding the enforceability of restrictive covenants in an employment agreement.

  • They are viable only for a limited time – usually 3,6, 9, or 12 months.
  • Restrictions cannot be too broad. If the restriction is not reasonable, it will be unenforceable by the court.
  • The court will not enforce the clause if it denies ex-employees the right to earn a living.
  • It will not be enforceable if the covenant prevents all contact with relevant business contacts.
  • Senior employees who regularly interact with customers and contacts are more likely to have an enforceable restrictive covenant than junior employees.
  • The agreement of both parties to the covenant does not guarantee enforceability.
  • These clauses are usually not enforceable unless the employer can prove they are necessary to protect their legitimate business interests, such as customer connections, confidential information, or supplier connections.

For example, a non-compete clause may be difficult to enforce if a non-solicitation or non-dealing clause would achieve the same goal.

  • An employer cannot typically prevent former employees from competing with them. However, if an employer can prove to a judge that the covenant is necessary to protect their legitimate business interests and is not overly restrictive, it may be upheld and enforced.

What Happens if You Violate Restrictive Covenants?

The consequences of breaching restrictive covenants are not automatically applied. It is typically up to the party that is entitled to enforce the covenant to take legal action against the breaching party.

The consequences of breaching can include injunctions, damages, or both. An injunction is a court order that requires the employee to stop a specific action or behaviour.

Damages refer to the monetary compensation awarded to an employer who has suffered harm or loss due to a breach of contract. The purpose of awarding damages is to restore the former employer to the position they would have been in had the breach not occurred.

Damages are typically paid by employees who breached the agreement or contract and caused harm to the former employer. The consequences that may apply in a given situation will depend on the specific language of the covenant and the applicable laws in the jurisdiction where the covenant was created.

To learn more about how we can help you understand restrictive covenants, please contact IAS at 0333 305 9375 or through our website to schedule a consultation today.

Our team of immigration law experts can help you navigate restrictive covenants in employment contracts.

What if the Employer Takes No Action Following a Breach?

If an employer takes no action when you breach a negative covenant, it does not necessarily mean that you are free from consequences. The terms of the contract remain in effect and your employer can choose to take legal action against you at any time within the time specified on the contract – even if they have not done so immediately.

Depending on the nature of the breach, your employer may be entitled to seek damages, injunctive relief or other legal remedies. The specific consequences will depend on the terms of your contract and the laws in your jurisdiction.

How Do They Calculate the Compensation Value Employers Are Entitled to After a Breach?

The compensation calculation for a breach depends on various factors, such as the nature and extent of the breach, the type of restriction involved, and the impact of the breach on the employer’s business.

Generally, the compensation amount is determined by calculating the financial loss suffered by the employer due to the breach. This can include the loss of clients or customers, revenue and profits. The compensation amount may also include any expenses incurred by the employer to enforce the restrictive covenants.

Sometimes, the compensation amount may be calculated based on a percentage of the employee’s salary or remuneration. This is particularly true if the restrictive covenant contains a liquidated damages clause specifying a predetermined compensation amount in case of a breach.

Restrictive Covenants When Leaving a Job

When leaving a job that is subject to restrictive covenants, it is important to take steps to ensure that you comply with the terms of the covenant and protect your interests going forward.

Review the Terms of the Restrictive Covenants

Before taking any action, review the terms carefully. Ensure you understand what actions are prohibited and what you are permitted to take. Seek legal advice if necessary to fully understand your rights and obligations.

Address and Negotiate Restrictive covenants

When negotiating restrictive covenants, it is important to be clear about your objectives and to seek legal advice if necessary. Consider negotiating for a more limited or specific restriction, such as a restriction on soliciting your former employer’s clients rather than a blanket prohibition on competing.

You can also negotiate for a shorter duration of the covenant or for financial compensation in exchange for agreeing. It is important to approach the negotiation constructively and professionally and be prepared to compromise where appropriate.

Consider negotiating with your former employer: If you believe the restrictive covenant is unreasonable or unfair, you may wish to negotiate with your former employer to have the covenant removed or modified. This may involve demonstrating that the covenant is not necessary to protect the employer’s legitimate business interests or that it is unduly restrictive on your ability to earn a living.

Ensure Compliance With Restrictive Covenants

To ensure compliance with restrictive covenants, it is important to review the covenant’s terms carefully and get legal advice if necessary. You should be clear about what is prohibited under the covenant and what actions you are permitted to take.

It is important to avoid any actions that may be seen as a breach of the covenant, as this may result in legal action being taken against you. You may also consider implementing internal policies and procedures to ensure that you and your employees are aware of and comply with any restrictive covenants that apply to your business.

Call us today to talk to an advisor about how you can seek a guidance on restrictive covenants in employment contracts.

How Can IAS Help?

If you are unsure about how to comply with the terms of the restrictive covenants, or if you are concerned about the impact of the covenant on your ability to work, seek legal advice. At IAS, we understand how important it is for you to avail better career opportunities for yourself.

If you are considering knowing more about your options in your employment contract, we can help. Our qualified and experienced legal professional can help you understand your rights and obligations and advise you on the best course of action.

Having IAS on your side assures you that your matter will be handled professionally and efficiently, increasing your chances of success.

To learn more about how we can help you with restrictive covenants, please contact us at 0333 305 9375 or through our website to schedule a consultation today.

We offer employment advice sessions as face to face appointments at all of our UK offices, or via the phone.

Table of Contents

Table of Contents will appear here.

Frequently Asked Questions

Any modification or renegotiation would need to be agreed upon by both parties and may require consideration, such as additional compensation or benefits. Furthermore, some restrictive covenants may contain, in particular circumstances, explicit clauses that prohibit modification or renegotiation

Such covenants are typically enforced through legal action. If an employer believes an employee has breached a covenant, they may file a lawsuit or application seeking to implement the covenant. The local government or court then has the authority to enforce the covenant and may impose penalties on the employee if they are found to have breached the terms of the covenant.

Sometimes, the employer may need to provide evidence to demonstrate that the covenant is necessary to protect their legitimate business interests. The judge also considers whether the covenant is reasonable and fair in the circumstances.

Alternative dispute resolution methods, such as mediation and arbitration, can resolve disputes relating to restrictive covenants. These methods are often quicker and less costly than pursuing legal action through the courts.

Mediation involves a neutral third party who assists the parties in negotiating a resolution, while arbitration involves a third party who makes a binding decision. Direct negotiation or seeking the assistance of a neutral third party can also be useful.

Related Posts

Architectural building with Canadian flag on top
17 May 2024

Open Work Permit Canada for Nigerians

Canada has a growing economy that allows immigrants to explore different career Opportunities. Nigerian citizens who wish to work in Canada can be granted an open work permit provided the employee and employer meet the eligibility requirements.
For further information on how to apply for an open work permit, contact The Immigration Advice Service (IAS) at +23413438882 and +44 (0) 3316300929. Our immigration lawyers are ever ready to help you with the application process.

Read Article
Silver, antique Canadian coin
17 May 2024

Canada Visa Requirements for Nigeria

If you are a Nigerian looking to go to Canada, you must apply for a Canadian Visa to work, visit or study there.

Read Article
Two friends standing together on street in America
17 May 2024

Easiest Way to Get American Visa from Nigeria

If you’re a Nigerian waiting to visit the US, you’ve probably heard about an easy way to get an American visa. However, there’s no easy visa; you must meet the necessary requirements.
For more information about applying for an American Visa from Nigeria, including support and advice about the process, or any other queries you might have, then call our immigration experts today at +23413438882 and +44 (0) 3316300929 or contact us online.

Read Article
Nigeria welcome sign on white arch
17 May 2024

Entry to the UK from Nigeria

To live and work in the UK, you will need a visa. This guide will give you all the information you need about the type of visa you should apply for and other criteria you need to consider when making an application for entry to the UK from Nigeria.

Read Article
Nigerian man wearing purple coloured shirt
17 May 2024

How Much Is Priority UK Visa in Nigeria?

If you are applying for a UK visa to either stay short-term or settle there, you can apply to fast-track your visa application from Nigeria if you need to obtain a visa at short notice.
Immigration Advice Service (IAS) are available to advise you on the different fees and processing times depending on your visa and what level of priority you require. Call us today on +23413438882 or +44 (0) 3316300929 or you can contact us online.

Read Article
Student stepping outside, through glass door
17 May 2024

Study Gap for UK Student Visa from Nigeria

You may want to take a break from your studies before applying to study in the UK; but do study gaps impact your UK Study visa and do UK universities offer courses for international students?
Immigration Advice Service (IAS) can help you apply for a Study visa in the UK and provide advice on your study gap. Call us on +44 (0) 3316300929 and +23413438882, or message us online.

Read Article

Get in touch with our team

Learn about our professional services and find out how we can help.

X
Contact Us