Employment contracts are often left unchecked and outdated—many employers trust that their contracts are robust simply because they’re in place. However, when a key employee departs and a dispute arises, these contracts can turn out to be toothless. We discuss the best options for protecting your business post-employee exit.
The Risk: A Familiar Scenario
Your employee has gained experience, insight into your business strategy, access to client relationships, and knowledge of sensitive data, intellectual property, and market positioning.
Then, they resign. They join a rival or launch their own venture—NewCo—and begin targeting your clients, suppliers, or even your staff. The damage is done.
Sound familiar? It’s a common and costly situation.
So, what can you do—or more importantly, what should you have done?
Restrictive Covenants: The Teeth in the Contract
Restrictive covenants are designed to protect your business from unfair competition when an employee leaves.
They must be clearly set out in a signed employment contract or explicitly referenced in related documents such as a staff handbook or side letter. Without proper incorporation, the clauses may be unenforceable.
The law allows employers to include post-termination restrictions—but only if they protect a legitimate business interest and are reasonable in scope, geography, and duration. Poor drafting risks the whole clause being struck out.
Types of Restrictive Covenants
Non-solicitation
Prevents the former employee from actively contacting your clients with the aim of winning their business.
Non-dealing
Prevents any form of business interaction between the ex-employee and your clients, even if the client initiates contact. This clause helps you rebuild and protect your client base.
Non-poaching
Protects your workforce by preventing the former employee from encouraging your staff to join them elsewhere.
Non-compete
Prevents the individual from joining a direct competitor or setting up a rival business for a limited time after leaving. Courts have described this as “the most powerful weapon in an employer’s armoury”—but also the hardest to enforce due to concerns about restraint of trade.
Confidentiality
These provisions protect your trade secrets, business processes, and intellectual property. Such clauses should appear not only in employment contracts, but also in consultancy agreements, shareholder agreements, and contracts for services.
Legal Remedies: What Happens If There’s a Breach?
If a former employee breaches their restrictions, the first step is to examine the contract. Success depends on the strength of the wording and the evidence of actual or threatened harm to your business.
Key Legal Options
Injunctive Relief
You can seek a court order to prevent further damage. Time is critical and delays can undermine the urgency and reduce the chance of obtaining an injunction.
Damages
You may be entitled to financial compensation for losses caused by the breach. Evidence of actual loss will be vital.
Undertakings
A legally binding promise (agreed or ordered by the court) to stop the prohibited behaviour. Breach of an undertaking can itself lead to further legal action.
Delivery Up
The court may order the return of confidential information or company property held by the ex-employee.
Points to Consider
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Restrictive covenants are only enforceable if they are clearly set out in the employment contract and are reasonable in both scope and duration.
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Contracts should be bespoke and tailored to your business and the employee’s role.
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If an employee moves into a new role, revisit the contract—any changes must be supported by consideration (e.g. a promotion, bonus, or pay rise).
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The right type of restriction will depend on the employee’s seniority, market influence, your geographical reach, and the nature of your services.
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Confidentiality clauses should be backed by evidence that the information truly is confidential and commercially sensitive.
Final Thoughts: Prevention is Better Than Cure
Litigation is costly and disruptive. By proactively reviewing and updating your employment contracts, you place your business in the strongest position possible.
If you’re facing a dispute or want to avoid one, gathering and preserving evidence is essential. Early legal advice can make all the difference.
Need advice?
Contact Jonathan Partridge by email jonathan.partridge@dtmlegal.com or call 01244 354811.
