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30th April 2025
In today’s fast-paced and highly competitive business landscape, safeguarding sensitive information, client relationships, and intellectual property is essential to long-term success.
When an employee leaves your organisation, there’s always a risk that they could take valuable knowledge or contacts with them. This is why many businesses choose to include restrictive covenants in employment contracts.
In this blog post, we will look at the different types of restrictive covenants in employment, how courts decide what is enforceable, and practical, proactive advice for employers on implementing them.
Restrictive covenants are legally binding clauses in employment contracts that protect a company’s interests after an employee leaves the organisation.
These provisions limit former employees’ activities for a set period after they leave, with the goal of preventing potential business damage.
They reduce the risk of an ex-employee using insider knowledge, industry contacts, or influence gained during their employment to the detriment of their former employer, whether that be soliciting clients, setting up a rival business or sharing confidential data.
However, a fair balance must be achieved. While restrictive covenants exist to protect the company, they must not unfairly limit a former employee’s ability to earn a living or advance their career.
The courts will only enforce restrictions that are reasonable and necessary to protect business interests, not those that seek to eliminate competition.
Restrictive covenants in employment contracts take various forms, each designed to protect a specific aspect of a business after an employee leaves.
While the overall goal is to reduce potential harm, each clause operates differently depending on the risk it addresses.
Here’s a closer look at the most common types:
A confidentiality clause ensures that sensitive company information is not disclosed or misused, even after employees leave the company. This may include:
What distinguishes confidentiality clauses is that they are typically enforceable even if they are not formalised as part of a restrictive covenant. This duty is often enforced by common law or implied contract terms.
However, including a specific clause reinforces the employer’s position and clarifies employee expectations.
A non-solicitation clause prohibits former employees from actively approaching clients, customers, or suppliers of the company in an attempt to draw them away.
This applies whether the individual works for themselves or for a competitor.
For example, if a sales manager moves to a rival firm, a non-solicitation clause would prevent them from contacting clients they previously managed, even if those clients would be a natural fit for the new company. This type of clause is particularly valuable in roles with regular client interaction.
While similar to a non-solicitation clause, a non-dealing clause goes a step further. It prevents a former employee from doing business with a client or customer of their former employer, even if the client approaches them first.
For example, if a client contacts the former employee and says, “We’d like to work with you at your new firm,” the non-dealing clause prevents the former employee from proceeding.
This type of clause is especially important in industries where clients have long-standing relationships with individual employees rather than the company itself.
A non-compete clause prevents an ex-employee from working for a competitor or starting a competing business for a set period after leaving.
These clauses often include a time limit and a geographic scope to restrict direct local competition.
Non-compete clauses are the most scrutinised by courts and must be carefully drafted because they have the potential to be restrictive. If they are deemed too broad or excessive, they are unlikely to be enforced.
Despite this, they continue to be an effective tool for businesses, particularly in senior or strategic roles, where there is a real risk of competition causing significant commercial damage.
A non-poaching clause prevents former employees from encouraging current employees to leave the company and join them in a new venture. These clauses help to maintain team structure, continuity, and morale.
Losing multiple employees to a former colleague can disrupt operations and reduce productivity in close-knit teams, particularly those with specialised skill sets.
A well-drafted non-poaching clause protects against this, ensuring a stable workforce and minimising disruption.
When it comes to restrictive covenants in employment contracts, enforceability is determined on one key legal principle: reasonability.
Below, we look at what the courts will consider when assessing reasonability.
Most post-termination restrictions lasting between 3 to 6 months are considered fair and reasonable.
This timeframe is usually enough to protect client relationships and confidential information during the business’s most vulnerable period after an employee leaves.
That said, longer durations are not automatically unenforceable, but they must be justified.
They may be considered reasonable for senior or specialist positions, especially if employees had access to sensitive strategic information or played an important role in client relationship management.
However, if no such justification exists, courts are likely to dismiss the clause as excessive.
Geographical limitations must reflect the true scope of the business’ operations or influence.
If a company only operates in one region or city, a clause restricting a former employee from working across the country or globally is unlikely to be enforced.
Courts prefer covenants that apply to specific, relevant areas, such as “within a 20-mile radius of the company’s main office,” rather than overly broad or vague territorial limits.
The more expansive the scope, the stronger the justification required.
The restriction imposed must be consistent with the employee’s actual duties and level of responsibility.
Senior executives or client-facing employees are more likely to face enforceable restrictions because their departure poses a significant risk to the company.
However, imposing the same level of restriction on a junior administrator or support role with limited access to sensitive data or client contact is rarely justified.
Courts will question whether the clause is tailored to the individual’s specific risks.
Restrictive covenants must protect genuine confidential information rather than material that is already in the public domain or easily accessible.
This includes pricing models and business-specific internal processes.
If an employer attempts to use a covenant to prevent an ex-employee from using generic industry knowledge or information that is already widely known or publicly available, the clause is unlikely to hold up.
Having restrictive covenants in place is one thing; actually enforcing them is another.
A well-drafted clause is only effective if the appropriate steps are taken at each stage of the employment lifecycle.
Here’s what employers should know about covenants at each stage of employment:
Before an employee starts employment, it is critical to establish the right legal foundations. Employers should make sure that restrictive covenants are clearly included in the employment contract from the outset.
If they are provided in a separate agreement, they must be explicitly referenced in the main contract and signed by the employee to avoid ambiguity and increase enforceability.
This proactive step eliminates the possibility of future disputes and gives the business confidence that its key interests will be protected from the start.
Maintaining effective restrictive covenants requires regular monitoring throughout an employee’s time with the business.
Employment contracts should be reviewed on a regular basis throughout the organisation, especially when employees are promoted, given more responsibilities, or gain access to more sensitive information.
As roles change, so should the associated restrictive covenants. Outdated or overly generic clauses may expose the business, so employers should update existing restrictions or add new ones as needed.
Keeping contracts up to date ensures that restrictions are relevant, enforceable, and appropriately tailored to protect the company’s legitimate business interests.
You should create a clear protocol for notifying your HR team as soon as an employee hands in their resignation.
When notified, promptly check for signed restrictive covenants and gather relevant information about the employee’s next steps, including their future employer and role, if possible.
It is also important to remind the departing employee of their post-termination responsibilities. This not only raises their awareness, but it can also act as a powerful deterrent to potential breaches.
Where appropriate and contractually permitted, consider placing the employee on garden leave during their notice period to restrict access to sensitive information and minimise risk.
Once an employee has left, keep an eye out for any signs of potential breaches of their restrictive covenants.
Red flags may include the sudden loss of key clients, unusual shifts in business activity, or industry chatter indicating that the former employee is acting in conflict with their contractual obligations.
If a breach is suspected, act quickly by sending a formal cease and desist letter. This should clearly outline the specific covenant in question, as well as the steps necessary to correct the situation.
Where appropriate and justified, you may need to notify the employee’s new employer of the contractual restrictions in place. This can be an important step in deterring future violations.
If the breach results in a measurable loss for your company or poses a significant risk, you may need to start a formal legal process. This could include establishing a pre-action protocol and pursuing legal action to protect your company’s interests.
Restrictive covenants employment law can be a legal minefield, but with proper guidance, your business can stay protected and compliant.
Understanding how to structure and enforce restrictive covenants is critical for protecting your company’s future, whether you’re drafting new employment contracts or reviewing existing ones.
At Sapphire HR, we don’t just step in when problems arise, we act as a proactive partner, helping you put the right protections in place before issues occur.
From tailored employment contracts to strategic HR support, our team ensures your business has compliant, enforceable, and role-appropriate post-termination restrictions.
Book a consultation with one of our consultants today to review your documentation, mitigate risk, and ensure your business is protected.
Here to Help, Not Replace Experts:
The information contained in this blog presented for general informational purposes only. While we strive to provide accurate and up-to-date content, legal and HR practices can evolve rapidly. This blog is not a substitute for professional advice.
For specific questions or concerns regarding your unique situation, we highly recommend taking professional advice and booking a consultation with a Sapphire HR Consultant. Our consultants are experts in the field and can provide tailored guidance to address your specific needs.
We aim to work truly in partnership with our client organisations and to develop a high-quality, competent HR Service for all clients, the HR Provider that they can rely on and who gets to understand the culture and vision of your business.
