Post-termination restrictive covenants are contractual terms which restrict your activities after the termination of your employment. Restrictive covenants are often found in your contract of employment, and by signing up to them you are agreeing not to do certain things after your employment has ended.
Restrictive covenants are designed to protect your former employer against you using any of the trade secrets or confidential information which you had access to during your employment for your benefit or the benefit of a new employer.
Common restrictive covenants include the following:
a. non-solicitation (prevents you from taking away customers or clients from your former employer);
b. non-dealing (prevents you from contacting or being contacted by clients or customers of your former employer);
c. non-compete (prevents you from working for a competitor of your former employer);
d. non-poaching (prevents you from poaching employees from your former employer); or
e. non-disclosure (prevents you from disclosing confidential information).
You have an ongoing duty of confidentiality to your employer regardless of any restrictive covenants, and therefore if you are considering using your employer’s trade secrets or confidential information for your own benefit, you should take detailed legal advice on the consequences of doing so.
It is a common misconception that restrictive covenants are unenforceable in law, and are largely a waste of time. The true position is that, whilst they may be void if they are a restraint of trade or contrary to public policy, if your employer can show that they genuinely had a legitimate business interest to protect and the terms of the restrictive covenants are reasonable, they are likely to be enforceable. In order for restrictive covenants to be considered reasonable, they must be properly drafted.
In practice, this means that your employer cannot impose a covenant upon you merely to stop you from competing with their business, however they can seek to stop you from using confidential information which legitimately belongs to them.
What your employer cannot do, however, is prevent you from using any skills or knowledge which you gained during the course of your day to day employment. There is often a fine line between the two and therefore you should take detailed legal advice from the Employment Law specialists at Taylor & Emmet if you need clarification on restrictive covenants.
If your employer is seeking to enforce restrictive covenants against you, firstly they may take steps to obtain an injunction preventing you from working for a competitor or requiring you to hand back confidential information. If this is unsuccessful, they could seek damages from you and any future employer for breach of the restrictive covenants. In deciding whether to award damages, the Courts will take into account firstly whether the restrictive covenant is enforceable, secondly whether you breached that covenant and thirdly whether the breach caused your employer financial loss. If the above criteria are satisfied, the Courts will go on to decide the level of compensation.
You should note that if your employment is terminated in breach of your contract of employment (for example, if your employer does not pay your notice pay, or behaves in such a way that entitles you to resign and claim Constructive Dismissal) this may give you an argument that any restrictive covenants in the contract become void and unenforceable. You should take detailed legal advice if you are considering acting in breach of restrictive covenants as the consequences can be severe.