Definition
A contractual clause that restricts an employee's freedom to work for competitors, solicit clients, or engage in competing business activities after leaving employment, enforceable only if reasonable in scope and duration.
UK Context
English common law governs restraint of trade. Courts apply a test of reasonableness, considering whether the restraint protects a legitimate business interest and goes no further than necessary. The burden of proof is on the employer. UK courts will not blue-pencil or rewrite unreasonable clauses to make them enforceable. The Government has considered but not yet introduced a statutory limit on the duration of non-compete clauses.
Best Practices
- Tailor restrictive covenants to the individual role rather than using standard clauses for all employees
- Keep durations as short as possible while still protecting legitimate interests, typically three to twelve months
- Define geographical scope and restricted activities precisely rather than using broad or vague language
- Review and update covenants when employees are promoted or their roles change significantly
- Seek specialist legal advice when drafting covenants and before attempting to enforce them
Frequently Asked Questions
Are restraint of trade clauses enforceable in the UK?
Restraint of trade clauses are enforceable only if the employer can demonstrate they are reasonable and necessary to protect a legitimate business interest. The burden of proof is on the employer. Clauses that are too broad, too long, or disproportionate will be struck down by the courts.
How long can a restraint of trade last?
There is no statutory maximum, but courts assess reasonableness. For most employees, restraints of three to six months are more likely to be enforceable. Senior executives with significant client relationships and access to confidential information may be subject to restraints of up to 12 months, but longer periods are rarely upheld.
What happens if a restraint of trade is breached?
If an employer believes a restraint has been breached, they can seek an injunction from the court to prevent continued breach and claim damages for any loss suffered. The employer must act quickly, as delays in seeking enforcement can undermine the case for an injunction. The court will assess the reasonableness of the clause before granting relief.