• What are post-termination restrictions (PTR)s?

PTRs (also known as restrictive covenants) are restrictions placed on an employee after their employment with their employer ends. The rationale behind them is that the employer has a need to protect a specific, legitimate business interest that could be damaged by the exiting employee. Examples of the types of legitimate interests that PTRs seek to protect are confidential information, customer connections and the goodwill and stability of the workforce.

• What types of PTRs are commonly used in employment contracts?

  1. Confidential information – where an ex-employee is prevented from sharing confidential information;
  2. Non-solicitation – where an ex-employee is prevented from contacting a client, customer, supplier etc of the employers with a view to obtaining their business (usually for a competitor);
  3. Non-dealing – where an ex-employee is prevented from providing certain services to customers, clients, suppliers etc of their former employer;
  4. Non-poaching – where an ex-employee is prevented from taking other employees to join them in working for a competitor, or from taking customers away from the business they have left;
  5. Non-compete – where an ex-employee is prevented from working for, or being associated with, a competitor.

• How long do they last?

With the exception of the non-disclosure of confidential information after employment, PTRs do not last indefinitely – to do so would unfairly restrict the employee’s freedoms in obtaining paid work.

There is no set rule for how long a PTR can last for. The time periods for each type of PTR should be tailored to each specific situation, taking into account how long it would be before the activity that is restricted would no longer pose a material threat if it were to be carried out by the employee in question.  In general, we find PTRs are usually in place for 3-12 months.

• Are they actually enforceable?

As a starting point, PTRs in employment contracts are seen as “void” and are notoriously difficult and complex when it comes to enforcement, due to factors such as:

  1. Restraint of trade – the courts do not look kindly upon employers who are seeking to prevent former employees from earning a living;
  2. Inequality of the bargaining power in an employment relationship;
  3. Often, the employee will have had no say on the PTRs within their contract (some might not even haven been aware of them).

However, where an ex-employee breaches a PTR, it is possible for that PTR to be enforced against them if the employer is able to demonstrate to the court that (i) the PTR is in place to protect a legitimate interest and (ii) the PTR goes no further than is reasonable to protect that legitimate interest. It may also also have to show that actual harm has been, or could be, caused, in order for the courts to enforce the PTR.

• How can I make PTRs more enforceable?

PTRs should be tailored specifically to the individual circumstances – such as the individual’s role in the company, what information they have access to (customer/client lists, financial information etc), the level of access they have to that information, how likely it is that they could cause damage to the business by doing that specific action, and for how long that risk could last.

For example, a salesperson who has access to lists of key customers – an employer might want to put in place a PTR preventing them from soliciting or providing services to their customers. It would likely cause the company material damage if they did those things and, as a result, more likely to be enforced by a court. However, those same restrictions in place for a receptionist who did not have access to the client list is less likely to be enforceable.

• Can I put the same PTRs in everyone’s contract?

There is nothing stopping an employer putting standard PTRs in every employee’s contract, but it is less likely that they will be enforceable if they have not been tailored to that specific employee (as explained above). However, many employers still choose to insert a “standard” set of restrictions into every contract, hoping that at least some will be enforceable, or at the very least they will have a “deterrent” effect.

Post termination restrictions are a highly complex and contested area of law, particularly in respect of employment law contracts, and we always suggest getting specific, tailored advice before implementing PTRs into any of your employment contract. For further advice, please do not hesitate to contact a member of our employment law team, Laura: laura@mcmsolicitors.co.uk or Holly: holly@mcmsolicitors.co.uk

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