31 March 2023
Restrictive covenants in employment contracts are included for business protection. An employer holds certain legitimate business interests, and the confidentiality clauses of the contract may not provide adequate protection for those interests.
Such terms will only be enforceable if they provide no more than reasonable protection for the specified legitimate business interest.
Today it is more typical to include a form of non-dealing requirement, in the hope or expectation of preventing the departing employing from any form of business dealings with specified customers, colleagues or suppliers. Although, such a requirement may sometimes be hard to enforce due to those reasonableness principles.
A non-solicitation requirement is typically included, seeking to prevent the former employee from encouraging those people and businesses to follow them in their new pursuit.
There is sometimes confusion about whether a non-solicitation obligation may bite if the customer, colleague or supplier first contacts the former employee. In this regard, the case authority of Croesus Financial Services Ltd v Bradshaw and another [2013] EWHC (QB) provides helpful clarity (at paragraph 102):
102. It is often assumed that there is no solicitation where it is the customer who first contacts the ex-employee. From his evidence, this seems to have been the basis on which Matthew Bradshaw proceeded. However, this is not necessarily the case and although the question who made the first contact is relevant, all the circumstances surrounding that contact must be considered, each case depending on its own facts. There is no general rule that wherever a customer initiates contact, an individual can respond and even go so far as making a presentation without breaching a prohibition on solicitation as Ms Stone submitted. Rather, these are questions of fact and degree. There is obviously a distinction to be drawn between solicitation and dealing with; accordingly, a critical element that distinguishes the two is that solicitation requires persuasion or encouragement of clients to transfer their business.
Our employment law specialists regularly advise on restrictive covenants, in the context of their drafting and enforcement.