A post-termination restriction (also known as a restrictive covenant) is a tool often used by employers in the employment contract to protect its business interests by restricting the activities of an employee for a specified period after they leave the organisation. The specified period can range from 3 months to anywhere between 9-12 months after the last date of employment.
The use of restrictive covenants should be proportionate to the needs of the business. A one size fits all method is not encouraged and employers should consider tailoring restrictions to specific roles as this will help to justify the restriction in the event it is challenged.
Non-solicitation covenants: prevent poaching of clients/customers/suppliers of the former employer. This prevents actively trying to take business away.
Non-dealing covenants: prevent a former employee from dealing with former clients/customers/suppliers. This prevents the former employee from passively taking business away.
Non-poaching and non-employment covenants: which prevent an employee poaching former colleagues.
Non-competition covenants: restrictions on the former employee working in similar employment for a competitor.
It is often the case that post-termination restrictions will be restated in Settlement Agreements or COT3 agreements, reminding the employee of the restrictions that they have already entered into when commencing employment, and which remain in place for a period following the Termination Date.
The terms of the agreement will usually make express reference to the fact that the employee will remain bound by the ongoing contractual obligations to the employer, including their duties relating to confidentiality and post-termination restrictions.
Under the terms of a Settlement Agreement the employee will be entitled to independent legal advice to ensure they understand the terms of the agreement, the impact of it and their obligations moving forward. An adviser should explain the restrictions that remain in place and the implications of any breach.
It is sometimes the case that employers use Settlement Agreements where there is no real dispute or where the employment is coming to an end as a result of a redundancy situation. When the employment relationship comes to an amicable end there may be scope to reduce or waive any contractual restrictions either by reducing the term of a restriction or waiving them altogether.
If the employee is of the view that the restrictions will be overburdensome and will prevent them from securing meaningful employment, the time to negotiate the removal of the restriction will be before the agreement is signed.
An employee is not however entitled to independent legal advice when entering into a COT3 and we would therefore recommend that advice is sought before the agreement is entered into to ensure an employee understands the terms and the impact of any breach.
In the normal course of events the employee will be able to challenge the reasonableness of any restriction in the event they feel the specified period or geography of it is too overburdensome. In the absence of any COT3 or Settlement Agreement re-stating the restrictions, an employee may have good grounds for such a challenge.
However, a court will be reluctant to revisit or overturn the terms where one party seeks to challenge the reasonableness of the restrictions entered into after they have agreed to them having had the benefit of legal advice.
An individual should have obtained advice prior to signing the agreement and therefore the time to challenge any terms, including the post-termination restrictions would have been during the negotiation period.
The ability to challenge the enforceability of such a restriction is significantly reduced following completion of the settlement.
Whilst in the absence of such an agreement we would recommend open communication with the employer in the first instance to determine whether agreement could be reached in releasing you from such restrictions, it is unlikely that the employer will be willing to revisit the agreed settlement.
Our team can assist with a range of enquiries. If you have post-termination restrictions in your employment contract and have been threatened with action from your employer and would like further support, please contact us on 01983 897003.
Appointments are available by telephone or via video call, so no matter where you are in England or Wales we can assist you.
The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.
The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.
Solicitor in Eastleigh | Solicitor in Salisbury | Solicitor Isle of Wight
