What are restrictive covenants?
In today’s competitive business environment, protecting your company’s proprietary interests is more than just good practice—it’s essential. Often in SMEs, the key proprietary interest comprises your people, and one of the most effective tools available to employers to protect their business is the use of restrictive covenants in employment contracts.
Restrictive covenants are contractual obligations that seek to limit what an employee can do during and after their employment. They’re designed to safeguard your business from risks such as client poaching, talent drain, and the misuse of confidential information. But not all covenants are created equal, and their enforceability depends on what you’re trying to protect, and how well they’re drafted to do that.
Here are the main types of restrictions:
Non-solicitation of clients/customers: This type of restriction prevents ex-employees from actively seeking business from your clients.
Non-solicitation of employees: Stops former employees from recruiting your team.
Non-compete clauses: Restrict employees from joining competitors—though these are hard to enforce and often controversial.
Non-dealing clauses: Prohibit any business dealings with your clients or suppliers, even if initiated by the third party.
Non-poaching clauses: Prevent ex-employees from hiring former colleagues.
To be enforceable, these clauses must protect a legitimate business interest—such as trade secrets, customer relationships, or workforce stability and must be reasonable in scope, duration, and geography. For example, it wouldn’t be reasonable to restrict an ex-employee’s actions forever, or to restrict an ex-employee from dealing with clients in the US if you don’t operate in the US. That’s why restrictive covenants have to be carefully drafted to tailor the protection to your business. Typically, restrictive covenants last for a period of 3 to 12 months from termination (unless the employee is placed on garden leave, where this period would be offset against the duration of the restriction), with the duration increasing with seniority.
Courts won’t rewrite overly broad covenants. If it’s too wide, it’s void. So precision matters. However, when carefully drafted and tailored to protect the key risks in your business, restrictive covenants can be a crucial element of maintaining your competitive advantage.
If you're reviewing your employment contracts or wondering whether your current restrictive covenants are fit for purpose, please get in touch to see how we can help.
