Restrictive Covenants In Employment Contracts

Restrictive covenants in employment contracts are anti-competitive, restrictive on trade and against public policy. A court will only enforce a restrictive covenant if it protects a legitimate business interest (trade secret or confidential information, client base, key employees or supplier relationships) and if it extends no further than is reasonably necessary to protect that interest (Herbert Morris Ltd v Saxelby [1916] AC 688 (HL)). In addition recent case law highlights emerging trends in the court's approach and other factors taken into consideration.

The restrictive covenant must be drafted specifically to protect the identified legitimate business interest using means that are reasonably necessary, especially relating to the duration, scope and nature and effect of the restriction. In Wincanton Ltd v Cranny and SDM European Transport Ltd [2000] IRLR 716,CA the failed covenant was a general clause for inclusion in all employment contracts.

Restrictive covenants generally restrict the employee from working for a competitor or in a certain location (Non-competition and Area Covenants), prevent the employee from dealing with or soliciting clients, prevent the poaching of employees or prevent the use of confidential information...