Definition
Clauses in an employment contract that restrict what an employee can do after their employment ends. Common types include non-compete, non-solicitation (of clients), non-dealing, and non-poaching (of employees). They must be reasonable to be enforceable.
UK Context
UK courts will only enforce restrictive covenants that go no further than necessary to protect a legitimate business interest. Each covenant must be reasonable in scope, duration, and geography. Post-termination non-compete clauses are the hardest to enforce. The government has proposed limiting non-compete clauses to three months.
Best Practices
- Tailor restrictive covenants to the specific role and the legitimate interests they are designed to protect
- Keep durations as short as possible; six months is generally more enforceable than twelve months
- Review covenants when an employee is promoted or their role changes, as they may need updating
Frequently Asked Questions
How long can a non-compete clause last?
There is no statutory maximum, but courts assess reasonableness. In practice, 3 to 6 months is more likely to be enforceable than 12 months. The government has proposed capping non-compete clauses at 3 months, though this has not yet been legislated.
What makes a restrictive covenant enforceable?
It must protect a legitimate business interest such as trade secrets, client relationships, or a stable workforce. It must be no wider than reasonably necessary in scope, duration, and geography. Overly broad covenants are likely to be struck down by the courts.