Post-termination restrictions (also known as restrictive covenants) in employment contracts are clauses that place limitations on an employee's activities after they leave their employment. These restrictions can cover a range of activities, from preventing employees from working for competitors to restricting them from soliciting clients or poaching other employees. In this article, we will explore what post-termination restrictions are, why employers use them, how enforceable they are, and what employees should consider before agreeing to them.

What Are Post-Termination Restrictions?

Post-termination restrictions, often referred to as "restrictive covenants," are clauses within an employment contract that seek to limit an employee's actions after they leave their employer. These restrictions are typically included in contracts for employees in senior, strategic, or client-facing roles. The most common types of post-termination restrictions include:

• Non-compete clauses: These prevent the employee from working for a competing business usually within a certain geographical area and for a specific period of time.
• Non-solicitation clauses: These prevent the employee from approaching or soliciting the company's clients or customers after leaving.
• Non-poaching clauses: These restrict the employee from enticing other employees to leave the company and join a competitor or a new venture.
• Confidentiality clauses: These require employees to protect the company’s confidential information during their employment and after it ends and prevent them from using or disclosing the confidential information.

Why Do Employers Use Post-Termination Restrictions?

Employers use post-termination restrictions to protect their business interests and maintain a competitive edge. These clauses are designed to prevent former employees from using the knowledge, skills, or relationships they gained while employed to benefit a competitor or start a competing business. The key reasons employers include these restrictions in employment contracts include:

1. Protecting confidential information: Employers want to safeguard sensitive business data, trade secrets, and intellectual property that could be used by a former employee in a competing role.
2. Maintaining client relationships: Employees in client-facing roles often develop close relationships with customers. Non-solicitation clauses help prevent these employees from poaching clients once they leave.
3. Retaining staff: Non-poaching clauses help employers prevent former employees from recruiting other staff members, which could lead to a loss of talent and disruption within the business.

Are Post-Termination Restrictions Enforceable in English Law?

Under English law, post-termination restrictions can be enforceable, but only if protect a legitimate interest of the employer and are reasonable. The courts are generally reluctant to enforce restrictive covenants unless they serve a legitimate business interest and are not overly restrictive. Several key factors are considered when determining whether a post-termination restriction is enforceable:

1. Protection of legitimate business interests: The restriction must protect a legitimate business interest, such as safeguarding confidential information, client relationships, or trade secrets. If the restriction is deemed unnecessary for protecting such interests, it is likely to be unenforceable.
2. Reasonableness of the restriction: The court will assess whether the restriction is reasonable in terms of its duration, geographical scope, and the nature of the activity being restricted, where there is a legitimate interest to protect. If the restriction goes further than necessary to protect the employer’s legitimate interest, it will be void. The question of reasonableness must be considered at the time the restriction was entered into, not in light of subsequent events. 
3. Scope of the restriction: A non-compete clause, for example, that prevents a former employee from working in the same industry worldwide may be seen as too wide and therefore unenforceable.
4. Employee’s role and seniority: To be reasonable, restrictions should be tailored to the specific employee and the business in which they operate. The nature of the employee’s role is also a crucial factor. Post-termination restrictions are more likely to be enforceable for employees in senior or client-facing roles who have access to sensitive business information or established relationships with clients.

What Should Employees Consider Before Agreeing to Post-Termination Restrictions?

Employees should carefully consider any post-termination restrictions in their employment contracts before agreeing to them. Here are a few things to keep in mind:

1. Seek legal advice: If you’re unsure about the enforceability of a post-termination restriction, it’s wise to seek legal advice. A solicitor can assess whether the restriction is likely to be enforceable and advise you on how to negotiate more reasonable terms.
2. Understand the potential impact on future employment: Post-termination restrictions, particularly non-compete clauses, can have a significant impact on an employee’s ability to find new work in their chosen field. It’s important to understand the scope and duration of these clauses to avoid being restricted from pursuing certain roles or industries after leaving the company.
3. Negotiate terms: If a post-termination restriction seems overly broad or unreasonable, it may be possible to negotiate its terms before signing the contract. For example, you might ask for a shorter duration or a smaller geographical scope for a non-compete clause, or ask for some of the restriction to be removed entirely. 
4. Consider the consequences of breach: Breaching a post-termination restriction can lead to serious legal consequences, including an injunction to prevent further violations and/or claims for damages. Make sure you fully understand the potential consequences of not adhering to the restrictions.

Conclusion

Post-termination restrictions are a valuable tool for employers looking to protect their business interests, but they must be reasonable to be enforceable under English law. 

If you are given a contract with post-termination restrictions as an employee, it’s essential to understand what they mean and how best to respond. For further guidance, you should take advice from an experienced employment law solicitor.

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Article by

Sally Eastwood

Senior Associate

0800 915 7777

This article provides general information about post-termination restrictions in employment contracts and is not intended as legal advice. If you are an employer or employee with concerns about post-termination restrictions, it is recommended that you seek legal advice specific to your situation

We offer a range of services, so please contact our friendly customer services team to discuss further via  hello@kilgannonlaw.co.uk or  0800 915 7777.

Disclaimer 

The above provides a general overview of areas in employment law and is not intended nor construed as providing specific legal advice.  This article is for information purposes only and is correct at the time of publication. It does not constitute legal advice.

18.02.25