1. Start by identifying the interest or interest(s) which you are trying to protect. Is it the relationship which an employee has developed (or will develop) with your customers, the stability of your workforce or sensitive confidential information?
2. Once you have identified the interest(s) consider which covenants are most appropriate to protect it or them. Some of the most common types of post termination restrictions are non-solicitation of customers, non-dealing with customers, non-poaching of employees, non-employment of employees and “pure” non-compete covenants, which attempt to prevent the employee from working for a competitor.
3. The duration of the covenant in question should relate to the interest which you are seeking to protect. For example, if you are trying to prevent confidential information being misused, how long will it take before the information becomes obsolete? Or, if the interest in question is a customer relationship, how long will it take for a new member of staff to rebuild the relationship with the customer? If the covenant is longer than the period necessary to protect your interests then it will fail.
4. The court will only restrain unfair competition, not competition per se. This means that your covenant must only prevent the employee from exploiting relationships and information which are rightfully yours. So, if your covenant is aimed at protecting your customer relationships, then the employee should only be restrained from dealing with customers with whom he had some kind of relationship or about whom he had relevant confidential information. If all of the company’s customers are covered by the restriction then it goes further than is reasonable and will not be enforced. Similarly covenants dealing with poaching or recruitment of employees should only cover employees with whom the restrained employee had a relationship or about whom he had relevant information.
5. In clauses which restrict solicitation of, or dealing with, customers or clients, the restrictions should apply only to competitive businesses and activities. You cannot prevent ex-employees from selling different products or services to your customers than those which you sell.
6. Confidential information restrictions must include a clear and carefully crafted definition of confidential information. Without such a definition, it may be very hard to protect particular information either by way of injunction or by suing for losses suffered through misuse.
7. When introducing new covenants for existing employees, make sure that the covenants are supported by consideration (that is by something given by the employer in return) like a pay rise, annual bonus or small one-off payment. The consideration cannot be something to which the employee is already entitled under his contract. Without proper and valid consideration the covenant may be unenforceable, even if the employee agrees to it at the time.
8. Include the ability to put the employee on garden leave during his notice period. Garden leave is much easier to enforce than post termination covenants, as the employee continues to be paid and to be an employee throughout. This is by far the simplest and most effective method of keeping an employee completely out of the market place and away from your competitors for a period of time.
9. Reserve the right to bring employment to an end immediately by making a payment in lieu of notice. Otherwise if you need urgently to terminate employment you will have to breach the contract by not giving due notice and this means you will lose the ability to rely on any covenants.
10. Do bear in mind that good drafting can only take you so far. If there is no real risk of damage to your business or if the covenant is simply seeking to prevent your business from healthy and fair competition then the most careful drafting in the world will not make it enforceable. Similarly, it may be very difficult to enforce stringent covenants for junior or administrative staff. Ultimately, even if you have “ticked all the boxes” in preparing your draft, the court can still decide in its discretion that it does not want to grant an injunction to restrain breach of the covenant.
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