Restrictive Covenants and Non Compete Clauses
Restrictive covenants and non compete clauses (or post-termination restrictions; whatever you call them) are clauses within a contract of employment or settlement agreement which restrict a departing employee’s ability to trade freely. These restrictions are subject to strict limits and can only be enforced where reasonable.
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It is the right of an individual to trade in any lawful way they choose but employers may wish their employees to enter into post-termination restrictions upon starting their employment so that the legitimate business interests of the employer will be protected.
Individuals are free to enter into contractual restraints should they so wish and for high level employees if an employer cannot lawfully restrain his behaviour once their employment ends this could be a cause for mistrust, lack of promotion or training opportunities and therefore such clauses can be very useful.
The law therefore strikes a balance to be struck between two competing principles: on the one hand the desire to stop unnecessary restraints of trade; and on the other hand allowing parties the freedom to enter into restrictions should they so wish.
Restraints are currently presumed to be unenforceable until they are proven by a former employer to be reasonable. Should a valid restraint of trade clause exist is it very possible for a company to take legal action to stop former employees from breaching promises to restrain their activities.
See also our page on confidential information.