Spring clean: steps for restrictive covenants and new jobs

Spring is all about new beginnings. As the weather warms up, job opportunities often blossom – but in the excitement of taking your next step, it’s important to check for any restrictions linked to your current employment.

Businesses can legitimately protect their interests with reasonable restrictive covenants. Ignoring these could create a turbulent start in your new job rather than the fresh opportunity you’re hoping for.

What is a restrictive covenant?

Employment and consultancy contracts – particularly for senior roles – often contain clauses that limit your working activity after you leave. These post-termination restrictive covenants are designed to prevent damage to a business by an ex-employee. They usually relate to working in competing businesses, dealing with clients and poaching other staff members.

Isn’t restricting my right to work illegal?

Generally, agreements that restrain trade or prevent someone earning a living are against the public interest and unenforceable. But the law also recognises the importance of protecting confidential information, customer connections, goodwill and workforce stability.

A court will balance these factors case by case and may enforce restrictive covenants if they’re reasonable. Don’t assume that a clause restricting your right to work is automatically unenforceable.

What types of restrictive covenants may be enforceable?

The reasonableness of restraints depends on the circumstances, but covenants commonly considered enforceable include:

• Non-compete clauses – preventing ex-employees from working for a competitor for a specified period
• Non-solicitation clauses – stopping ex-employees from approaching customers or clients of their former employer with a view to obtaining their business
• Non-dealing clauses – preventing ex-employees from having any dealings with clients, customers or suppliers of the former employer, even if they approach the ex-employee first
• Non-poaching clauses – stopping ex-employees from approaching former colleagues and enticing them to join their new company.

General employment duties

Even if your contract doesn’t contain express restrictive covenants, the law implies a duty to behave honestly and faithfully towards your employer. This includes not using or disclosing confidential information gained in the course of employment – particularly trade secrets. This obligation carries on after the end of your employment.

You may also breach your implied duty of fidelity if, while still employed, you prepare to compete with your employer – for example, by copying customer lists or taking confidential information home.

What can I do to prevent issues when moving jobs?

As you look forward to starting your new position, take steps to ensure you meet all your express and implied duties to your current employer:

• Check your current employment agreement for any post-termination restrictions. If you’re also a shareholder in the company, check your shareholders’ agreement for restrictive covenants too
• If restrictions might make it difficult to start or perform your new job, consider obtaining professional advice. Unreasonably wide clauses may not be enforceable
• If you brought clients to the business when you started because they wanted to deal with you personally, keep a clear written record of them in case they choose to follow you rather than remain with your ex-employer. Take advice so you understand what you can and can’t do in these circumstances
• Don’t make digital or hard copies of any confidential information, designs, diagrams, lists or contact information belonging to the business. Make sure you return all versions to your ex-employer
• Return all equipment to your ex-employer, including computers, laptops and mobile phones.

Ensuring a good start in your new job

If your ex-employer believes you’re in breach of restrictions specified in your employment contract, they may take legal action against you. Your new employer may be joined in this action if they’re thought to be complicit in this breach. To avoid this, inform your new employer if you have any restrictions in your old employment contract and discuss how they affect your new role. This is far preferable to them being unexpectedly drawn into a dispute with your ex-employer.

Spring cleaning to prevent hay fever

As you prepare to begin a new chapter this spring, make sure to give your old job a thorough ‘spring clean’: return all information and assets that belong to your ex-employer and stay mindful of your implied and express obligations. Professional advice can help you avoid breaching enforceable post-termination restrictive covenants.

Take simple steps to end your employment well, so that from the end of one job will spring a happy new beginning.