Restrictive covenants factsheet

Published on: 03/02/2015

Guide to enforcing restrictive covenants for an employee.

The purpose of restrictive covenants

Many employers employ staff who, due to the knowledge and contacts they gain whilst employed, have the potential to damage the employer’s business if they leave to join a competitor or set up their own business in competition. Former employees may want to use the personal contacts they acquired whilst employed to poach customers, suppliers or staff of their former employer. They may also want to use certain confidential information acquired during their previous employment to help their new employer/business gain a competitive advantage over their former employer.

One way for an employer to protect its business from such a threat is to ensure that its employees sign employment contracts containing enforceable restrictive covenants. (It will be more difficult to seek to introduce such restrictions at a later stage in the employment relationship).

Restrictive covenants are contractual restrictions on the activities of employees after the termination of their employment, such as a restriction on an employee’s ability to compete with his/her former employer.