Restrictive covenants are common in employment contracts. They prevent former employees from doing certain things following the termination of their employment.
There are two types of restrictive covenants which are commonly found in employment contracts:
- Non-solicitation – preventing ex-employees from 'poaching' other members of staff or clients of their previous employers; and
- Non-competition – preventing ex-employees from working for, or setting up, a competitor business.
Restrictive covenants will normally be considered void, meaning they will not restrict the former employee, unless the employer has a legitimate interest of the business and the protection sought in the covenant is reasonable. Whether a covenant is 'reasonable' will depend on a variety of factors such as the duration of the restraint, the needs of the business and the seniority of the employee.
However, the Court can enforce an overly restrictive covenant by 'severing' part of the covenant in order to make the covenant less onerous on the employee. The recent Supreme Court decision of Tillman v Egon Zehnder Ltd [2019] UKSC 32 provides new guidance as to the circumstances in which Courts may do this:
1.The part to be removed must be capable of being removed without the need to change the remaining wording of the clause; and
2.Removing that part must not change the overall effect of the clause.
From the points of view of both employers and employees, this guidance creates more uncertainty as it is difficult to determine when a covenant is capable of severance. Employers must therefore take more care when drafting covenants to strike a balance between protecting their interests and not imposing an excessive restraint on the employee which is incapable of enforcement or is ultimately severed from the employment contract. Employees should also be aware of their rights in respect of restrictive covenants, as an overly restrictive covenant may impact on their future ability to find work.
It is therefore essential to seek legal advice from our specialist, experienced solicitors on such matters.
Our dedicated team provides expert advice to both employers and employees on a range of aspects of Employment Law.
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*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.
