Restrictive covenants are regularly used in contracts of employment.An employer is entitled to protect its legitimate business interest and seek to prevent employees from acting contrary to the interests of the business.Typical covenants include the following:
A duty of confidentiality
A prohibition on working for direct or named competitors
Setting up a business in competition with the employer
Employing key employees from the employer’s business
A prohibition soliciting, canvassing or dealing with clients or customers of the business
Restrictive covenants can be enforced.In post termination restrictions are void on the basis that they are a restraint on trade and contrary to public policy, therefore to ensure that a business can rely on a restrictive covenant it must be able to show that it is defined to protect the legitimate business interests of the company and goes no further than what is necessary to protect those interests.In those circumstances the Court can uphold such clauses.
Restrictive covenants may be expressly set out in the contract of employment however there are some covenants that are implied into an employee’s contract of employment during the time he/she is employed.Employers should take professional legal advice when drafting restrictive covenants.
Departing employees are often well-placed to take advantage of confidential information, strategic plans, customer and client details or other information about their employer’s business,... Read more
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