Restrictive Covenants – What you need to know

covenants

Restrictive Covenants – What you need to know

We often find not everyone is fully up to speed on what a covenant is, so here we have a quick guide on what it is and how it’s used in the world of HR.

A covenant is a contract, agreement or written promise between two individuals that often constitutes a pledge to do or refrain from doing something. If validly is reached in the contractual agreement, the covenant is enforceable by a court. The person who makes the promise/agreement is known as the covenantor and the person who the promise is made too is known as the covenantee. A restrictive covenant is not considered illegal however, the restrictions have been known to limit the ability of what an employee can do to a business.

 

The different types of restrictive covenants in a contract

Non-Competition Clause – This restriction is in place when an employee leaves a business. It stops you from working for one of the organisations competitors in a similar role you had at your previous employers.

 

Non-Solicitation Clause – This prevents you from approaching any of your previous employer’s clients or in some cases prospective clients. This normally takes place within specific reference to contacts an employee had direct dealings with for a certain period of time in the lead up to the employee’s termination date.

 

Non-Dealing Clause – This covenant follows on from the non-solicitation clause. It blocks you from making any dealings with previous clients. This is based upon if you make the first or even encourage the deal to be made.

 

Non-Poaching Clause – This clause helps to protect a company from their staff members following a departing employee.

 

Gardening Leave – This covenant means once an employee has handed in their notice, the employer either sees fit to prevent the employee from coming to the office, stops them working altogether or makes them work from a different location.

 

The majority of candidates don’t understand the legal consequences of what it means to sign a contract bearing restrictive covenants. Each individual case will vary therefore whether the clauses are enforceable will be decided by the Court of Law.

 

Restrictive covenants must not be any more restrictive on the employee than is reasonably necessary to protect the employer’s business. The Courts must assess how reasonable the restrictive covenant is and if it’s too difficult to deal with, then it is more than likely to unenforceable by the Courts.

 

A legitimate business interest should be provided for why you need protection when enforcing a restrictive covenant. This principle has been created to determine whether the future actions could have a significant effect on the business or whether the company is competing against an employee.

 

Is it worth breaking restrictive covenants?

Taking clients and contacts with you can run the risk of your previous employer issuing legal proceedings against you for breach of contract. This can include an application for an injunction restraining both your new employer and yourself. You shouldn’t breach your covenants without first taking professional advice, as it could be costly for your new employer and yourself.

 

If you have any queries regarding restrictive covenants and if you should have one in place, please contact a member of the HPC team on 0844 800 5932 or email: help@highperformanceconsultancy.com.

 

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