Following recent events, it’s been widely reported that Jeremy Clarkson’s future on television has been in doubt due to restrictive covenants in his contract with the BBC. It appears that a deal with an online streaming company may be able to circumvent these restrictions but only time will tell whether Auntie Beeb will try and oppose this.
It’s not just high ranking celebrities and executives who have restrictive covenants in their contracts. Increasingly many employers are inserting clauses into employment contracts restricting what employees are able to do following termination of their employment.
The purpose of a restrictive covenant is to protect employers by limiting the manner in which former employees can use information gained by them during employment. It’s clear to see how much damage could be caused for example if a salesperson was free to join a competitor and start poaching all of their ex-employer’s best customers.
It’s important to balance the rights of both parties however and the starting point is that all post-termination restrictions and restrictive covenants are void on the grounds of public policy except to the extent that they do not go further than necessary to protect an employer’s legitimate business interests and are not unreasonable.
Restrictive covenants generally fall into one of four categories:-
- Non-Competition;
- Non-Solicitation;
- Non-Dealing;
- Non-Poaching.
The courts will generally not enforce a restrictive covenant which lasts more than 12 months but even this can be deemed unreasonable and each case must be assessed on its own merits. To be safe, the period should be kept as short as possible and typically this will be in the region of 3 – 6 months. The key point however is that the employer must be able to show that they are seeking to protect a legitimate business interest and that the restrictive covenant does not go further than this.
In assessing whether a restrictive covenant is reasonable the courts will not only look at the time period but also whether the restrictive covenant has a geographical restriction. Clearly, a worldwide ban on being able to work for similar businesses could be unfair, particularly for employees in specialised or niche industries and the restrictive covenant must be worded very carefully in order to be upheld.
The nature of the business will also need to be considered. Obviously, certain businesses are heavily reliant on building relationships with key clients who will provide repeat business and so protecting key contacts could be deemed to be reasonable. It is very important that the restrictive covenant is properly worded because if it is deemed to be excessive then it will simply be declared void and the employer will lose all protection.
At Freeman Jones Solicitors we are experts in providing advice on restrictive covenants and other contract disputes for both employees and employers. Our employment law solicitors are available on 01244 506 444, for you to make an appointment for a FREE 30 minute consultation to discuss your matter.
