07 Nov

Restrictive covenants and clauses – are they an important part of your employment contracts?

Ami Naru, Partner, Travlaw

What is integral to your business? Is it the data you hold, your clients or your staff? 

Arguably, all these elements are vital to a business and should be protected when employees move on from a company. This is why restrictive covenants exist in contracts of employment – they prevent the actions of ex-employees jeopardising the business after they leave. A typical example of a restrictive covenant prevents someone from working for a competitor business, also known as a non-compete clause. Another important restrictive covenant protects confidential information, such as client data, from being taken when someone leaves a company. 

Getting it right, however, is crucial. If restrictive covenants are not drafted with precision or are drafted too widely, they are unenforceable, meaning your business is not protected and you are unable to seek damages. Clauses must not restrict an ex-employee unreasonably, and you need to show you have a legitimate business interest to protect. 

In a recent case which went to the Supreme Court, it was held for the first time that part of a non-compete clause could be removed to make the rest of the clause enforceable. In this particular case, severing part of the clause was possible without the need to change the rest of the wording, meaning that the non-compete clause was enforceable. This highlights why such clauses need to be properly drafted to be reliable.

Hear more from Ami at ABTA’s Employment Law for Travel Employers seminar, taking place in Central London on Tuesday 3 December. Find out more, download the agenda and register your place now at abta.com/abtaevents.