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Departing employees are often well-placed to take advantage of confidential information, customer and client details or other information about their employer’s business, after the termination of their employment in the absence of post-termination restrictions (or restrictive covenants, as they are otherwise known) in their contracts of employment.
This can seriously harm the former employer’s business. It is therefore common to find post-termination restrictions in employment contracts of executive directors or other senior executives which seek to prevent post-termination activities for a defined period after termination, such as:
- Solicitation of customers, clients and suppliers;
- Solicitation of other employees; and
- Working or dealing with competitors.
As a general rule, any contractual term restricting an employee’s activities following termination is void for being in restraint of trade and contrary to public policy. However, the Courts have accepted that, in certain circumstances, post-termination restrictions may be enforceable if an employer can show that:
the restrictions are in place to protect a legitimate business interest that it is appropriate to protect; and
the protection sought goes no further than necessary to protect that legitimate business interest having regard to the interests of the parties and the public interest.
Post-termination restrictions are most commonly enforced by means of an injunction which prohibits individuals from breaching or continuing to breach the restrictions. In addition, or as an alternative, an employer may seek damages from the individual for breach of contract and/or undertakings that the individual will observe their contractual restrictions.
Injunctive proceedings can be extremely costly to defend. It is therefore imperative that you seek legal advice from an early stage on the enforceability of your post-termination restrictions and the implications of legal action being brought against you.
Let us help
If you have received notice from a former employer that you are engaging in activities in breach of your contractual restrictions and would like our advice, or if you would simply like one of our expert employment lawyers to advise you on the enforceability of the post-termination restrictions in your employment contract, do get in touch. We will review your contract, advise you on your options and, if necessary, correspond with your former employer to reach a satisfactory conclusion.