Post-Termination Restrictive Covenants
If you’re leaving a company, or have already left, you may be restricted from engaging in certain activities after your employment has ended by post-termination covenants. This will usually prevent you from dealing with customers, clients, suppliers or key employees of the employer for a defined period of time. They may also prevent you joining a competitor.
Post-termination restrictive covenants and confidentiality are clauses within a contract of employment or a Settlement Agreement which prevent employees from taking clients or poaching key employees from their former employer when they leave, or from working for a competitor.
To ensure you don’t breach your contract and face litigation, our specialist solicitors can advise you on whether or not they can be enforced and if they can be, ensure you understand and stay within the legal requirements.
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If you do have restrictive covenants in your contract, your options post-termination can be severely limited if they are enforceable. This could leave you unable to start work with a new employer for the period of time set out in the contract.
You may decide to ignore the restrictions, and go to work for the employer of your choice, taking your clients and contacts with you. However, you could run the risk of your old employer issuing legal proceedings against you to enforce the restrictive covenants.
Breaching post-termination restrictions can be a serious matter, and this is why it’s important to seek advice before you do anything which might expose you to a risk of being sued.
We can provide legal advice in the form of a restrictive covenant lawyer if you are concerned that your career plans might lead you to breach your contract or your former employer is trying to enforce the restrictions. Seeking legal advice will also be important if you have restrictive covenants as part of your redundancy agreement.
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What type of restrictions can your employer place on you after you leave your employment?
The most common types of restrictions are:
- General Confidentiality - these restrictions make it unlawful for you to divulge commercially sensitive information about your employer or its clients.
- Non-Soliciting or poaching - these clauses mean that you cannot approach your employer’s existing clients or key staff after your employment has ended.
- Non-Dealing - this type of restriction will prevent you from doing business with your employer’s existing clients or customers after you leave, even if they contact you. This could be a problem if, when you leave your job, you are likely to have a loyal ‘following’ of clients or customers.
- Non-Compete Agreement or Clauses - this restriction has broader implications than the others because it prevents you from leaving your employer to work for a company that they compete with. This also prevents you from leaving your employment to set up on a freelance or self-employed basis where you would be doing work in the same field.
If I’ve just accepted a job and my new employer has given me a contract containing post-termination restrictions, do I have to agree to it?
No. You can tell your employer that you do not want to accept the restrictive covenants and ask them to either amend or remove the covenants all together.
However, post-termination restrictions are a common feature of many contracts especially if you are at a senior level or you are a key employee. Ultimately you might find your job offer is withdrawn if you refuse to accept the restrictions.
If I’ve worked for my employee for some time and they’re now asking me to enter post-termination covenants, do I have to agree?
No - you are not obliged to agree to post-termination covenants. You may find a restrictive covenant to be unreasonable.
However, you need to consider the consequences of not accepting them. If you have less than two years employment under your belt, you have minimal job security as you do not have the right to bring claims of unfair dismissal.
If you have worked for your employer for two years or more, you could bring a claim for unfair dismissal if you were dismissed for refusing to agree to the covenants. Whether the dismissal was found to be unfair would depend on the facts of the case, and the process followed.
What are the consequences of breaching a post-termination covenant?
Your employer may threaten you with court action unless you stop working with their competitor, or stop dealing with their clients. They may also write to your new employer to point out that you have breached your covenants, and threaten to seek an injunction against you if they have lost business, and sue your new employer too. This would mean you could be prevented from moving to the new employer.
If you ignore their request, they might then apply to the courts for an injunction. If successful, this could result in significant costs to defend it. Your former employer could also claim damages if they have suffered any losses - for example, if you have persuaded customers or clients to do business with you instead of them.
For these reasons, it is strongly advisable to seek specialist employment law advice if you are concerned that your career plans might lead you to breach your contract.
As experienced providers of clear, easy-to-understand legal advice, our team will be more than happy to discuss how they can help you.