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Restrictive Covenants

Restrictive Covenants London

Restrictive Covenantrestrictive covenant: in contract law, a contractual promise... Solicitors – UK Employment Contracts

Our UK Commercial lawyers and restrictive covenant solicitors regularly advise both companies and individuals on restraint of trade and confidential information issues arising out of service contracts, consultancy agreements and contracts of employment.

Companies often seek to protect their business interests by having their employees, workers or consultants sign agreements that seek to impose restrictive covenants on the individual. Those covenants, if enforceable, will restrict the business activities an employee can be involved in following their resignation. Some of the restrictions most commonly imposed are:

  • Prohibiting the use or disclosure of the company’s confidential informationconfidential information: commercially sensitive information....
  • Prohibiting the use by the individual of a trading name that is deceptively similar to the company’s.
  • Prohibiting the individual from dealing with, or soliciting business from, the company’s clients and customers (commonly known as “non-dealing clauses” and “non-solicitation clauses”).
  • Prohibiting the individual from being involved in business activities that compete with those of the company (aka “non-competition clauses”).

Companies seeking to protect their business interests can commence court proceedings where restrictive covenants have been breached. Successful claimants can expect to obtain an injunctioninjunction: a type of remedy that a court may order in comme... restraining the individual from committing further breaches, as well as financial compensation, which can take the form of either:

  1. damagesdamages: in litigation and dispute resolution, financial com..., that is, the damagesdamages: in litigation and dispute resolution, financial com... that have flowed from the breach, such as lost future earnings where a customer has been enticed away by an ex-employee; or
  2. an account of profitsaccount of profits: an equitable remedy arising in commercia..., that is, the ex-employee will be ordered to account to the company by paying over a sum equal to the profits generated as a result of breaching the restraint of traderestraint of trade: a restriction on a party’s right to ca... clause.

For the individual, it is important to note that restrictive covenants within a contract should not always be taken at face value. If a court finds that a post-termination restriction goes further than is reasonably necessary to protect a company’s legitimate interests, that restriction will be ruled an unlawful restraint of traderestraint of trade: a restriction on a party’s right to ca... and thus unenforceable. Our London restrictive covenantrestrictive covenant: in contract law, a contractual promise... solicitors have considerable experience fighting the employee’s corner and successfully challenging the heavy-handed tactics of large companies attempting to enforce unreasonably wide restrictive covenants.

Restrictive covenant disputes can also arise in the context of mergers and acquisitions or agreements for the sale and purchase of business assets. It will be common for the vendor of the sharesshares: a unit in a company that quantifies what portion of ... or business assets to give restrictive covenants and undertakings not to solicit customers of the business or compete with it following completion of the transaction. In such cases, courts can more readily find that the relevant restraint of traderestraint of trade: a restriction on a party’s right to ca... clauses are reasonable and enforceable, particularly where the vendor has sold the sharesshares: a unit in a company that quantifies what portion of ... or business assets for a large sum.

If you require advice on the enforceability of a restrictive covenant or restraint of trade clause, please get in touch with South Bank Legal today for a confidential discussion.