Restrictive Covenant Disputes

If your employee has breached their restrictive covenants, the available remedies may include:

1. Making an urgent application for interim injunctive relief

This can prevent the employee from committing further breaches of their restrictions and/or force them to deliver up (or destroy) any confidential information that may have been retained from the employer. A final hearing may then be necessary to impose a final injunction on a more permanent basis. Applications for interim injunctive relief must be issued to the court without delay to evidence the urgency in taking steps to limit further damage to your business and to prevent any potential prejudice to the employer’s position. The court may refuse a delayed application if a good reason hasn’t been provided to justify the delay. In some cases, a delay of three weeks from the date of the breach would be enough for the court to refuse interim injunctive relief. It's possible to apply for injunctive relief before a breach has occurred if there’s strong evidence to suggest that there will be an imminent breach of a restrictive covenant. 

2. Making a claim against the employee to seek damages for loss suffered by the employer resulting from the restrictive covenant breach

This almost always requires an assessment as to the loss of profits caused by the employee’s breach, including any lost opportunities resulting from the breach. Claims for damages are often issued simultaneously against the employee’s new employer if there’s evidence that the new employer has induced the employee to breach their restrictive covenants.

The four main types of restrictive covenant are:

1. Non-compete clauses

These prevent an employee from working in competition with their former employer for a defined period of time, within a specialist area of work and/or within a certain geographical area. Non-compete clauses are the most ‘restrictive’ of such clauses because they prevent an individual from working in their trade after the termination of their employment. They’ll typically only be enforceable in relation to more senior employees. Depending on the seniority of the employee, the reasonable length for a non-compete restriction would typically be no longer than six to twelve months. Longer restrictions may be enforceable if the employer can justify this due to having a legitimate business interest to protect (or in cases involving commercial parties or in the context of the sale of a company or shares). But it’s insufficient to impose a lengthy non-compete restriction on an employee simply to prevent competition. 

2. Non-solicitation clauses

These prevent a former employee from contacting and attempting to poach or ‘solicit’ clients or customers of the employer for a defined period of time. Again, a time limit of up to between six and twelve months post-termination of employment would typically be deemed enforceable. 

3. Non-dealing clauses

These extend further than non-solicitation clauses by preventing former employees from dealing with clients, customers or suppliers — regardless of whether the third party approached the employee first. Depending on the length of the restriction, these are usually more difficult to enforce than non-solicitation clauses, so they’re subject to the same need for caution if drafted for too long a period. 

4. Non-poaching clauses

These prevent former employees from poaching the employer’s staff to join them in their new employment and/or business and are most common in circumstances where the former employee sets up a new business and attempts to persuade former team members to join them. To ensure the stability of the employer’s workforce, non-poaching clauses are usually easier to enforce, depending on the extent of the drafting and length of the restriction.