The inclusion of a restrictive covenant and a clause protecting confidential information in the employee's contract allows you to prevent competition from, or the exploitation of commercially sensitive information by, an ex-employee after employment ends. In the absence of such provisions an ex-employee may enter into competition with you, solicit your customers, use confidential information and poach your staff.
However, for a restrictive covenant to be enforceable the following conditions apply:
- the employer must have a legitimate business interest to protect; and
- the restraint must be reasonable in time and area, and it must be no wider than necessary to protect the employer's business.
Once again, legal advice should be obtained because covenants need careful drafting to ensure their validity and enforceability. The Court of Appeal has found, for instance, that a salesman who designed a bicycle safety helmet, obtained funding towards getting it into production, and showed it to a consultant who worked for a business competing with his employer, had not done enough to breach a clause in his contract restricting him from competing with his employer, because he was employed as a salesman (so the covenants only stopped him competing in the sales arena), not a designer.
