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The Truth about Restrictive Covenants

Most permanent employment contracts issued will incorporate restrictions. These restrictions are often specific clauses covering your period of employment and after. The restrictions are in place to safeguard your employer from the risk of you using knowledge and information gained during your employment for the benefit of a future employer or yourself should you set up a Company providing the same product or service.
A colleague of mine recently received a threatening letter from her previous employer drawing her attention to these very restrictions.
The burning question is, are these restrictive covenants enforceable?
The key thing to note in respect of restrictive covenants is that they are null and void as a restraint of trade. In the majority of cases any attempt by your previous employer to deny you the right to make a living in your selected trade or profession is not taken lightly by the court. Most blanket bans even for short periods of time are unlikely to be upheld by the court. In addition restriction broadly should be relevant to your position within that business. If you therefore held a junior role within a Company it would not be justifiable for you to be subject to an onerous restriction as opposed to if you held a very senior or Director level position. The error of most businesses is the reliance on a one size fits all policy when creating restrictive covenants, creating the risk of it being unenforceable.
To ensure restrictive covenants will be enforceable, the Company will need to demonstrate to the court that the restrictions are just, reasonable and are for a period no longer than necessary to protect the legitimate business interests.
The 3 main restrictive clauses cover the following:
1.     Non-Compete
2.     Non-dealing
3.     Non-poaching
Restrictive covenants are mainly used as a deterrent and employers are often aware that they are often unenforceable. In some cases if your previous employer believes there has been a breach the most common remedy pursued is an injunction. This is where the court will be asked to put an immediate stop on your activities until a hearing. Before a court will issue an interlocutory injunction they will need to be satisfied that there is a serious case to be tried. Therefore they would need to be certain that the claim is not frivolous or vexatious along with other specific considerations.
A breach of contract is also a consideration in the case of restrictive covenants. If your employer dismisses you in a wrongful manner then this in itself becomes a breach of contract. If your employer is in breach of contract, any restrictive covenants contained within it are automatically invalid.
Undoubtedly, a restrictive covenant in your contract of employment is by no means an indication that they are enforceable, but it can prove to be very expensive to defend an application by your employer and as such restrictive covenants should not be taken lightly.
Harries HR are experts in the provision of fit for purpose employment contract provision tailored to your business and employee specific needs. Please call us for full details on our services. 

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