Protection for Employers

Employers can protect their business after an employee leaves employment by including post-termination restrictions (Restrictive Covenants) in the employee’s contract of employment. However, such restrictions will only be enforceable if the employer can show that:

  • it has a legitimate business interest that it is necessary to protect; and
  • the protection sought by the restriction is no more than is reasonable having regard to the interests of the parties and the public interest.

Accordingly, restrictive covenants will be limited in terms of time, scope and geographical extent and will only be appropriate in respect of those employees who could damage the legitimate business interests of the employer, for example, senior executives or salesmen.

If a restrictive covenant is wider than is necessary to protect an employer’s legitimate business interests or imposed on employees with limited ability to damage the employer’s business, the restriction will likely be declared void by the courts as a restraint of trade and contrary to public policy.

Restrictions will generally involve:

  • non-solicitation of clients/prospective clients;
  • non-solicitation of key employees;
  • non-interference with suppliers; and
  • non-competition clauses.

Employers can protect confidential information, over and above trade secrets, where an express confidentiality clause has been included in an employee’s contract of employment. Again, however, such clauses must be drafted with sufficient precision for the employer to demonstrate that the clause is necessary to protect its legitimate business interests and goes no further than is reasonable and necessary to protect those business interests following the termination of the employee’s contract.