Employment restrictive covenants are widely used in an attempt to protect the interests of a business, but many employers come unstuck when they try to enforce their contractual restrictive covenants because they are being used too widely!
General rule for Employment Restrictive Covenant
As a general rule, restrictive covenants for employment will only be enforceable, if an employer is able to prove that they are:
- Necessary to protect legitimate business interests
- Of a duration no longer than is necessary to protect those business interests
Mistakes employers make…
Many employers make the mistake of including restrictive covenants that are too wide and too generic and are therefore deemed to be unfair and unreasonable and consequently unenforceable and open to challenge.
Whilst these generic style employment restrictive covenants might help to deter or prevent some employees from breaching the terms and conditions of their employment, if you have a key member of staff who is potentially very poachable material, then you need to ensure that any employment restrictive covenants justifiably protect your business and can be enforceable.
When can’t covenants be used?
Employment restrictive covenants cannot be used as a restraint of trade – employers cannot prevent an employee from earning a living, and this is a key area where many employers go wrong. Basically, employers include a covenant that would in effect deny an employee the right to make a living in their chosen industry or profession. For example, an employment contract that imposes a blanket ban on a person working for a direct competitor, even for a short period of time, is unlikely to be enforced and this would be taken seriously in the courts.
Therefore, it is prudent for employers to include specific competitor Company names or to specify a specific geographical. This way the employment restrictive covenant has a better chance of being sufficiently narrow to ensure it is properly enforced.
Conclusion to covenants…
Ultimately, if you employ an individual and you feel they are in breach of their employment restrictive covenants when they leave, then it is your responsibility to convince the court that the restrictions were sufficiently narrow, so as to be properly enforced.