Although most people have heard of the term restrictive covenant in relation to employment contract many do not understand what exactly a restrictive covenant does and what impact it will have on their future employment. This article looks at the affect of restrictive covenants in employment contracts.
What Is The Definition Of A Restrictive Covenant?
A restrictive covenant is a term placed into your contract of employment to prevent you from taking certain action when you leave your current role. They are put into employment contracts to protect the employer and not the employee?
What Types Of Restrictive Covenant Are There?
There are several different types of restrictive covenants including the following:-
1. Non-competition covenants (these restrictive covenants are inserted to prevent you from working in the same area as your employer after you leave. They can be for a certain period of time and within a certain specified geographical area).
2. Non-solicitation (these covenants will stop you from taking clients of your current employer).
3. Non-poaching (this covenant is inserted to stop you returning to your old employer and taking staff with you to your new role).
4. Restrictions on use of confidential information (these covenants will stop you from sharing confidential information which you obtained whilst you were working for your employer).
A restrictive covenant can have a dramatic affect on your ability to obtain employment after you leave your current role. Therefore it is essential that you realise how serious restrictive covenants are before you sign a contract of employment.
Can Restrictive Covenants Be Enforced?
If a covenant is reasonable and necessary to protect the business interests of your employer then they can be enforceable. However, if your employer attempts to make the covenant too broad by making it for too long a period of time or covering too large a geographic area this may prevent it from being enforceable.
Another factor to take into account when considering whether a restrictive covenant is enforceable is the position of employment of the employee; for instance, a managing director or a chairman of a company will have more severe restrictive covenants than a secretary or receptionist for example.
Restrictive covenants can also be rendered unenforceable if the employer fails to follow the disciplinary or grievance procedure laid down in the employment contract. This action alone can render a restrictive covenant unenforceable.
Summary
Restrictive covenants can have a severe impact on the ability to obtain employment after you leave your current role. You should seek expert and specialist employment advice from an employment solicitor before signing a contract that contains restrictive covenants.
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