Why your business should use restrictive covenants
In your business, every client, employee, and supplier relationship counts. Losing a key account or team member to a competitor can have outsized consequences. That’s why restrictive covenants aren’t just for big corporates—they’re a strategic necessity for all businesses.
Here’s 5 reasons why you should consider using them:
Protecting Trade Connections: Your client relationships are hard-won. Non-solicitation and non-dealing clauses help ensure these relationships don’t walk out the door with a departing employee.
Safeguarding Confidential Information: Employees often have access to sensitive data that, if shared, could give a competing business an advantage. Restrictive covenants can prevent misuse of this confidential information post-employment.
Maintaining Workforce Stability: Losing one employee can trigger a domino effect, with other employees potentially leaving to the same competitors. Non-poaching clauses help prevent talent raids, giving you the opportunity to understand, and do something about, your key flight risks in the wake of a resignation.
Preserving Competitive Advantage: In fast-moving sectors, even a short head start can be critical. Non-compete clauses—used sparingly and appropriately—can help you reset and shore up key client relationships post-resignation.
Deterring Risky Hires by your Competitors: Most contracts require employees to notify potential new employers of the restrictive covenants, putting your competitors on notice that you take the protection of your business seriously. Such provisions can discourage competitors from hiring your staff and/or instruct their new employee to adhere to the restrictions to prevent legal exposure.
Restrictive covenants are not about being heavy-handed—they’re about being strategic and proportionate. When tailored to your business model and reviewed regularly, they can be a powerful tool for growth and resilience.
If you're scaling your business and want to ensure your contracts are keeping pace, get in touch to talk about how to protect your key relationships and competitive edge.
