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Restrictive Covenants and Garden Leave

If you are an employee you may or may not be aware of a common clause within employment contracts titled ‘Restrictive Covenants.’ Many employees sign employment contracts without fully understanding what this means.

What is a Restrictive Covenant?

A restrictive covenant is a common clause incorporated within an employment contract prohibiting employees from competing with their ex-employer for a period of time once an employee is no longer working for that business. There are different types of restrictions which are generally incorporated in to the clause including the following:

  • The clause would make it unlawful for ex-employees from disclosing sensitive information about the employer or its customers;
  • Non solicitation – Ex-employees are prohibited from approaching existing clients or members of staff after their employment has ended with the ex-employer;
  • Non-dealership – prohibiting employees from doing business with their ex-employer’s existing clients. This clause could become a problem as most employees are likely to have a loyal following of customers;
  • Non compete – this clause prevents employees from leaving their employment to work for a company who they are in competition with. The clause would also prevent employees from doing work in the same area of business.

Are restrictive covenants legally binding?

Well, the simple answer is yes they can be, provided they are reasonable regarding the interests of all parties at the time the restriction clause was entered into. The restriction must protect a legitimate business interest of a business which is appropriate to protect such as business contracts.

In order to enforce a restrictive covenant it must be necessary to protect an employer’s confidential information, contacts etc. The restrictions must be no wider than required for the protection of legitimate business interests of the business.

Breaching a restrictive covenant

If an ex-employee breaches a restrictive covenant, the ex-employer has various options to enforce the clauses depending on the breach, such options can include the following:

  • Applying for an interim injunction
  • Seeking damages from the employee
  • Undertakings
  • Declaration
  • Taking action against third parties

Garden leave

Garden leave is when an employee is resigning from their job or the employees employment is being terminated, they are instructed to stay away from work during the notice period, while still being paid and receiving benefits in accordance with their employment contract.

Garden leave is commonly used in conjunction with restrictive covenants. The benefit for an employer to place an employee on garden leave is so that it prevents them from accepting other job offers with a competitor. During the period of garden leave an employee is no longer privy to the business’s confidential information and the information which they have will essentially become out of date.

An employer s not in a position to place an employee on garden leave unless there is an express clause in the employee’s contract. Any such clause is subject to a test of reasonableness in relation to its duration. The period of garden leave should not be unreasonably long as the longer the period, the less likely it is that it would be enforceable in full. 

If you need help and advice regarding restrictive covenants and garden leave, please do not hesitate to contact us on 0113 350 4030 or at hello@scesolicitors.co.uk.

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SCE Solicitors is a boutique employment law and litigation practice based in Leeds which advises clients nationwide. Please note that the information in this blog is to provide information of general interest in a summary manner and should not be construed as individual legal advice. Readers should consult with SCE Solicitors or other professional counsel before acting on the information contained here.

Sam Mukhtar

Sam Mukhtar is a paralegal at SCE Solicitors, she has over 5 years of legal experience. Prior to starting her role at SCE Solicitors, she worked in a regional firm in Greater Manchester dealing with civil matters before moving to Leeds and joining the SCE team.
Sam Mukhtar

Latest posts by Sam Mukhtar (see all)

Sam Mukhtar

Sam Mukhtar is a paralegal at SCE Solicitors, she has over 5 years of legal experience. Prior to starting her role at SCE Solicitors, she worked in a regional firm in Greater Manchester dealing with civil matters before moving to Leeds and joining the SCE team.

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