Back to basics – Employment Law Series – Post Termination Restrictions – what all employers should know

We have put together a 5-part series of blogs in which we will explore the basics and fundamentals of employment law. Today’s focus is post termination restrictions.

It is critical for all HR officials and businesses to have a sound foundation in employment law so as to limit risk and avoid disputes …so let’s get the basics right!

Post Termination Restrictions – the basics you need to know

In this part of blog, we will focus on post termination restrictions, in particular the general and key principles and why employers may impose post-termination restrictive covenants

Why impose post-termination restrictive covenants?

Departing employees are often well-placed to take advantage of confidential information, strategic plans, customer and client details or other information about their employer's business, after the termination of their employment. They may attempt to use this information for the benefit of their new employer, or in order to set up a rival business. This can seriously harm the former employer's business.

Post-termination restrictive covenants: general principles

When enforcing a restrictive covenant, the court must consider the doctrine of restraint of trade. Any contractual term restricting an employee's activities after termination is void for being in restraint of trade and contrary to public policy, unless the employer can show that:

• It has a legitimate proprietary interest that it is appropriate to protect.
• The protection sought is no more than is reasonable having regard to the interests of the parties and the public interest.

Post-termination restraints are enforced by means of equitable remedies such as an injunction, which is granted at the discretion of the court by reference to what it regards as fair in the circumstances.

Summary of key principles

The court applies the following key principles in assessing and enforcing post-termination restrictive covenants:

• Post-termination restraints are enforceable if they are reasonable, having regard to the interests of the parties and the public interest. The question of reasonableness has to be considered at the point when the covenant was entered into, not in the light of subsequent events.
• Legitimate interest. To be enforceable, a restrictive covenant must be designed to protect a legitimate proprietary interest of the employer for which the restraint is reasonably necessary. Legitimate interests include an employer's trade connections with customers or suppliers, confidential information and maintaining the stability of the workforce.
• Preventing competition must not be an end in itself. Restrictive covenants having the sole aim of preventing competition are never upheld by the court. A non-competition restriction must be designed to protect the employer's confidential information, trade secrets or customer connections, and prevent the employee from obtaining an unfair advantage by exploiting these for their own, or another employer's, benefit. Non-solicitation clauses are therefore looked on more favourably than pure non-competition clauses.
• Restrictions must be no wider than necessary. For any covenant in restraint of trade to be treated as reasonable in the interests of the parties, "it must afford no more than adequate protection to the benefit of the party in whose favour it is imposed."

Contact hina@partnerslaw.co.uk if you would like to discuss enforcing, challenging or the application of post termination restrictions, or if you have issues in the workplace you would like to discuss formally or informally.