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Home » Latest News » Employee restrictions - protecting your investment

Employee restrictions - protecting your investment

Employee restrictions - protecting your investment

One of the greatest risks to any business is when a key employee leaves. This may be an employee in whom there has been a significant investment in terms of recruitment, training and development. Yet, unless a business takes steps to protect itself, it has no legal right to stop a former employee going to work for a competitor, setting up on their own in competition, poaching customers or taking other key members of staff.

Businesses are well advised to consider including terms within its employment contracts that prevent such activities. They are one of the most important tools to protect your business and it is strongly recommended that they are put in place when recruiting senior employees or those who are likely to develop strong customer relationships.

We often hear it suggested that post-termination restrictions are “not worth the paper they are written on.” However this isn’t true. For example, in a recent case the Court of Appeal allowed an injunction to be issued in favour of the employer despite the employee seeking to appeal against it. The Court specifically commented that when people sign a contract they should generally be held to the commitment they have made. What is important is to spend time getting the right restrictions in place; the courts will enforce them provided they are limited to what is genuinely necessary to protect the employer’s interests. The restrictions need to be tailored properly to the situation. This includes considering the length and scope of the restriction, the ‘cycle’ of customer relationships, the type of activity which is to be prevented, the employee’s seniority and the risk they prevent. In our experience, where employers encounter problems is if they haven’t approached the restrictions carefully, for example they may have used terms from a borrowed agreement that does not work for their business or simply been too heavy handed. In that case, the Courts won’t re-write the restrictions to water them down and they fail completely.

The government recently issued a ‘call for evidence’ on post termination restrictions in employment contracts and we are now awaiting the report on their findings. It seems unlikely that post termination restrictions will be outlawed altogether though, and in the meantime employers should review their arrangements and check what they have in place is adequate to protect their business.