Restrictive Covenants UK: Employment Contract Clauses

What this document is

A restrictive covenant is a contractual promise by an employee to refrain from doing certain things either during employment or for a defined period after they leave. In an employment setting, the most common examples are promises not to work for a competitor, not to approach the former employer's clients, not to hire away former colleagues, and not to misuse confidential information.

Under English law, any clause that restrains a person's freedom to trade or earn a living starts off as unenforceable. The employer then has to show two things: that the clause protects a legitimate business interest, such as client connections, confidential information or a stable workforce, and that the restriction goes no further than is reasonably necessary to protect that interest.

Reasonableness is judged by looking at the scope of activity covered, the geographical area, and the length of time the restriction lasts. A clause that tries to do too much often ends up doing nothing at all, because the court will refuse to enforce it rather than rewrite it for the employer.

How to use this document

1. Identify the legitimate business interest. Before drafting or agreeing a covenant, be clear on what the clause is actually protecting. Typical interests include client and customer connections, trade secrets, confidential pricing or strategy information, and the stability of the workforce. A covenant that does not tie back to a genuine interest of this kind is unlikely to survive a challenge. 2. Match the restriction to the role. The seniority, client exposure and access to information of the employee matters. A covenant that might be reasonable for a senior account director who owns the client relationship will often be too wide for a junior team member with no direct client contact. Tailoring the scope of the clause to the actual role strengthens enforceability. 3. Keep duration and geography proportionate. Courts tend to look sceptically at long post-termination periods and broad geographical areas. Many well-drafted covenants are measured in months rather than years, and cover only the markets or regions where the employer and employee genuinely operate. The narrower and shorter the restriction, the more likely it is to hold up. 4. Use separate, clearly worded clauses. Non-compete, non-solicitation, non-dealing and non-poaching clauses should each be drafted as standalone provisions with their own scope and duration. Bundling everything into one sprawling paragraph makes it harder to sever an unreasonable part if challenged, and can bring down otherwise workable restrictions with it. 5. Review the covenants when roles change. A covenant signed when someone joined as a graduate may be meaningless by the time they are running a department. Employers often refresh restrictive covenants on promotion or when responsibilities change significantly, sometimes with additional consideration, so the clause reflects the employee's current position rather than a role they left behind years ago.

Common questions