Restrictive covenants

Topic Index
Overview
Imposing covenants
What can be protected?
Reasonableness
Types of restrictive covenants
Confidentiality
Non-competition
Non-solicitation of customers
Non-solicitation of staff
Non-dealing

Overview

 

  • A restrictive covenant will generally be enforceable if an employer has a legitimate business interest to protect and any restraint is reasonable.
  • The nature and character of the business in which the employer and employee have been involved are relevant when deciding whether a restrictive covenant is reasonable.
  • Covenants restricting the employee to a greater extent than is reasonably necessary to protect the employer's legitimate interests will be unenforceable.
  • Employers cannot restrict former employees from using their skills, aptitude and general technical knowledge gained while in employment, but may impose reasonable restrictions to protect their business against such employees' use of knowledge and influence over the employer's customers and such employees' awareness of the employer's trade secrets or confidential information.
  • Employers should never be tempted to use 'off the shelf' covenants - they must be tailor-made to their specific circumstances and drafted with professional help.
  • An employer cannot enforce restrictive covenants if it has breached the employee's contract of employment (e.g. wrongful or constructive dismissal)....
     
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