Restrictive covenants and garden leave

Many covenants are drafted too widely to be enforceable. Whether yours is depends on what it actually protects and how far it goes — not on how firmly it is written.

[ If you have been threatened with an injunction, telephone rather than email: 0207 112 8818 ]

The starting point favours you

A restrictive covenant is void as a restraint of trade unless the employer can show it goes no further than reasonably necessary to protect a legitimate business interest.

The burden is on the employer. The court will not rewrite a covenant that is too wide to make it reasonable — though it may sever a discrete offending part if what remains still makes sense. So a clause drafted too broadly frequently fails altogether rather than being trimmed to something enforceable.

Legitimate interests are trade connections and client relationships, confidential information amounting to trade secrets, and stability of the workforce. Not, importantly, protection from competition as such. An employer cannot stop you competing simply because it would rather you did not.

What makes a covenant vulnerable

Duration. Six months is common and frequently enforceable for a senior employee. Twelve is harder to justify and depends heavily on the role. Longer periods are rarely upheld outside very senior positions or genuine trade-secret cases.

Scope. A non-compete covering an entire industry, rather than the part of it you worked in, is vulnerable. So is a non-solicitation clause covering every client of the business rather than those you dealt with, and a covenant that catches clients you never had contact with or who joined after you left.

Geography. A worldwide restriction for someone whose work was confined to London is difficult to defend.

Whether it fitted the job when you signed it. Reasonableness is assessed at the date the covenant was entered into. A covenant drafted for the senior role you were promoted into, but signed when you were a junior, is often unenforceable — and this is one of the most common and most overlooked weaknesses.

Whether the employer breached the contract first. If you were dismissed in repudiatory breach, the covenants may fall away entirely.

Garden leave

Being paid to stay away for your notice period. Two points are worth knowing.

It usually requires a contractual right. Without an express garden leave clause, requiring you to stay away may itself be a breach.

It is normally set off against the covenant. Time spent on garden leave usually reduces the period of any subsequent restriction, and a well-drafted contract says so. If yours does not, the court may take the garden leave into account when assessing reasonableness. A twelve-month restriction preceded by six months’ garden leave is a harder thing for an employer to defend.

If you have been threatened

The letter will be firm, will assert that the covenants are valid and enforceable, and will demand undertakings by a short deadline. Three things to understand.

The assertion is not the answer. Every such letter says the covenants are enforceable. Whether they are is a separate question that the letter is not evidence of.

Do not give undertakings before advice. Undertakings given voluntarily bind you whether or not the covenant was enforceable in the first place. This is the most common and most expensive mistake at this stage.

Do not ignore it either. Injunction applications move quickly and can be made at short notice. Silence is read as intransigence and affects how a court views you.

Speed matters here more than almost anywhere else in employment law. If you have a deadline, telephone us.

What we do

For employees: assess enforceability properly, respond to threats, negotiate a narrowing or release — which is frequently achievable and is usually the outcome that suits everyone — and defend injunction applications where necessary.

For employers: draft covenants that will survive, advise on enforcement, and give a realistic view of prospects before a great deal is spent on an application that may fail.

We do not act for both sides in the same matter and we run conflict checks before taking instructions.

Questions

Questions people ask us

Is my non-compete enforceable?

It depends on what it protects, how long it lasts, how wide it is, and whether it was reasonable when you signed it. Many are not, but this is a clause-by-clause question rather than a general one — send it to us and we will tell you.

My new employer says they will indemnify me. Is that enough?

It helps with costs but it does not prevent an injunction. An injunction stops you working; an indemnity pays your legal fees. They are different problems, and the first is the one that matters.

They took the covenant from a template. Does that matter?

Potentially a great deal. Template covenants applied across a workforce regardless of role are more likely to be too wide for the individual, because reasonableness is assessed against your job rather than against the business generally.

I signed a new contract when I was promoted. Which covenant applies?

Usually the most recent, though this is not always straightforward — particularly where the new contract was not properly executed or no fresh consideration was given. Worth checking rather than assuming.

Can I be stopped from taking clients who approach me?

A non-solicitation clause restricts you approaching them. A non-dealing clause goes further and prevents you acting for them even where they came to you. Which you have, and whether it is reasonable, makes a practical difference.

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