Restrictive Covenants

It is vital for any business that employees do not use confidential information and trade secrets in competition with the business or disclose them to third parties.

Restrictive covenants are contractual terms designed to protect such interests. They can prevent former employees from working for or setting up a competing business for a period of time after their employment with you. They can prevent former employees from poaching your staff and clients.

Restrictive covenants are a legal minefield. The best practical advice can often be more important than academic discussion about the nature and interpretation of terms. We give the best practical and legal advice. Our aim is to save you the cost of expensive litigation in the high court. If litigation is the only alternative, we use our experience to gain you the best result.

Case studies

Case Study 1:

Type of client:
Small-medium enterprise.

Area of law:
Confidential information / trade secrets.

Summary of dispute:
A senior manager of a health business left the company and went to work for a competing nearby company. His original employer had been advised by a solicitor to apply for an injunction and ignore the manager’s arguments about the terms of his contract. They did not want to enter into costly litigation or make the dispute public. They had the impression that the solicitor had not properly considered the manager’s arguments or the “non-compete/solicitation” clauses in the contract. Their main concern was not the fact that the manager was working for the new company but that he had taken and refused to return various documents.

What we did for the client:
Advising by telephone and email, given the urgency of the matter and after having only a few hours to look at the papers, we advised that most of the “non-compete/solicitation” clauses and restrictive covenants were almost definitely invalid because they lasted for 5 years post-employment. Our advice however was that there were general clauses in the contract about the return and use of confidential information and trade secrets which could be relied upon to achieve some type of positive result. We provided a suggested draft letter to the manager.

Outcome:
The manager took the letter to a very well respected firm of city solicitors who advised him that our position was correct. He could work for the competing company but had to return documents concerning research and designs for a new product. He also agreed not to use his knowledge of the relevant research and designs.

Case Study 2:

Type of client:
Finance Director.

Area of law:
Restraint of trade

Summary of dispute:
The director had moved to a competing business based in a different part of the UK. His was not and never had been involved in soliciting clients. His former employer threatened an injunction to stop him taking on the new job.

What we did for the client:
We advised that the anti-solicitation clause was largely irrelevant given the director’s role and that it was probably unreasonable to apply any general prohibition of employment in a competing business given the purported geographical scope of that clause. We helped the director draft correspondence setting out the arguments.

Outcome:
The former employer decided not to take any action against the director.

Time is often of the essence where legal matters are concerned.

Contact us on +44 (0)20 7815 3200 or email clerks@fivepaperemployment.com 

to discuss your issue today.