How to protect your business from ex-employees, everything you need to know about post-termination restrictive covenants.

Blog Posted: Wednesday 25th May 2022 by

What are post-termination restrictive covenants?

A restrictive covenant (non-compete clause) is a clause in an employment contract or services agreement that works to prohibit an individual from (among other things) competing with his or her ex-employer for a certain period after he or she has left the business.

By incorporating explicit restrictions from the start in a written employment contract, all parties will understand what is prohibited, how long the restrictions will remain, and under what conditions they will apply.

When written accurately and in compliance with employment, this can help protect your company from a former employee exploiting private information, strategic plans, business relationships, or other sensitive information negatively once the individual has left your employment.

Why do employers include restrictive covenants in employment contracts?

Employees who quit may be aiming to use what they know about their employer’s business to their advantage. Employees who are leaving will have access to sensitive information as well as information about customers and clients. Some employees may contemplate utilising this knowledge to help them start a competing company.

How enforceable are restrictive covenants in employment contracts?

Restriction covenants are enforceable if they are properly incorporated into an employee’s employment contract (or signed in writing by the employee and incorporated into the employee’s contract, or signed at the end of the employee’s employment in a settlement agreement with additional consideration provided).

If restrictive covenants are not properly worded or are not reasonable at the time, the parties entered the covenants, they will be unenforceable.

What can you do if employees breach their post-termination obligations?

You may be able to terminate an employee’s employment contract without a notice period or any payment in lieu of notice (PILON), with the loss of any bonus, commission, or benefits from any incentive scheme, if you can establish that the employee has broken their disclosure requirements.

If an employee is no longer employed, you may recover damages for losses incurred or profits earned as a result of the former employee’s violation. You might also seek an injunction to stop the former employee from working for or doing business with a new employer.

How can we help protect your business?

We always advise employers to review their employment contracts to make sure the business is protected and we have a number of employment clients approaching our employment law team for specialist legal advice because we also represent employees.

With our Retained HR packages at Human Results, we provide a regular review of your employment documents to guarantee they are updated, fully compliant and fit for purpose.

If you would like a free audit of your employment contracts and handbooks, call us today at 01952 288361 or email at ellie@human-results.co.uk.

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