Restrictive Covenants
What Are They — And Do They Apply To You?
If you’re leaving a job to join a competitor, start your own business, or work with former clients or colleagues, you may be told you’re bound by “restrictive covenants” — clauses in your contract that limit what you can do by way of competitive activity after leaving.
These can cover everything from poaching clients or staff, to working in a competing business or using confidential information. You may also be bound by terms in shareholder agreements or incentive schemes.
Too often, employees assume these restrictions are unenforceable or ignore them altogether — only to receive a solicitor’s letter threatening injunctions and legal costs. The reality is that restrictive covenants are highly fact-specific and increasingly well-drafted. Courts will enforce them if they are reasonable and protect a legitimate business interest.
What To Do If You’re Threatened with Legal Action
Employers may try to pressure you with aggressive legal letters demanding undertakings or threatening court proceedings. This can be hugely stressful — especially if you’ve already resigned, accepted a new job, or committed financially to a new venture. Some employers may even threaten your future employer with legal action, putting job offers at risk.
Getting specialist advice early can make a real difference. You may be able to:
- Challenge the validity of the restrictions entirely
- Negotiate a carve-out or reduced timeframe
- Offer tailored undertakings that protect your position
- Argue that your employer has breached your contract, making the restrictions unenforceable
Restrictive covenant issues often escalate quickly, so don’t delay in getting advice.