Post-termination restrictions (also known as restrictive covenants) in employment contracts are essential for protecting your business after an employee leaves. These clauses can prevent former employees from competing against you, soliciting and dealing with your clients, poaching your staff, safeguarding your confidential information and maintaining your competitive edge. In this article, we will explore what post-termination restrictions are, why you should use them, how enforceable they are, and how to draft them effectively to protect your business.

What Are Post-Termination Restrictions?

Post-termination restrictions, or restrictive covenants, are clauses within an employment contract that limit the actions of an employee after they leave your business. These restrictions are typically included for employees in senior, strategic, sales and 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, typically within a specified geographical area and for a certain period of time after their employment ends.
• Non-solicitation and non-dealing clauses: These prevent the employee from contacting, soliciting and dealing with your clients or customers after they leave for a certain period of time.
• Non-poaching clauses: These stop the employee from encouraging other employees to leave and join a competitor or a new business venture.
• Confidentiality clauses: These require employees to keep your company’s confidential information protected, even after their employment ends.

Why Should Employers Use Post-Termination Restrictions?

Post-termination restrictions are essential for protecting your business and maintaining a competitive advantage. These clauses are designed to prevent former employees from using the skills, knowledge, and relationships they gained while employed to benefit a competitor or start a rival business. Here are key reasons why employers include these restrictions:

1. Protecting confidential information: Safeguard sensitive business data such as client database lists, pricing structures, marketing strategy, trade secrets, and intellectual property that a former employee could misuse at a competing company.
2. Maintaining client relationships: Employees in client-facing roles often build close relationships with customers. Non-solicitation and non-dealing clauses help prevent these employees from taking your customers with them after they leave.
3. Retaining staff: Non-poaching clauses help prevent former employees from recruiting your talent, which could lead to the loss of valuable staff and business disruption.

Are Post-Termination Restrictions Enforceable?

Under English law, post-termination restrictions can be enforceable, but only if they protect a legitimate business interest and are deemed reasonable. When determining enforceability, several factors are considered, including:

1. Protection of legitimate business interests: The restriction must protect a legitimate interest, such as safeguarding confidential information, client relationships, or trade secrets. If the restriction does not serve such a purpose, 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 is more extensive than necessary, it will likely be considered unenforceable. 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: The nature of the employee’s role is crucial. Post-termination restrictions are more likely to be enforceable for employees in senior or client-facing roles, where they have access to sensitive business information or established client relationships. To be reasonable, restrictions should be tailored to the specific employee and the business in which they operate. 

How to Draft Effective Post-Termination Restrictions

When drafting post-termination restrictions, it’s important to ensure that they are tailored to the specific employee and business. Here are a few things to consider:

1. Understand the scope: Clearly define the scope of the restriction. For example, the geographical area and duration of a non-compete clause should be appropriate to protect your legitimate interests but not excessive.
2. Be specific: Clearly define which activities are prohibited, such as soliciting clients or poaching staff. This helps ensure that the restriction is enforceable.
3. Consider the employee's role: Post-termination restrictions should be aligned with the level of access the employee had to confidential information, clients, or trade secrets. Tailor the restrictions accordingly.
4. Review and update regularly: Ensure that the clauses are up to date and relevant to your business needs, especially as the business grows and evolves and where staff move into new roles. 

What Should Employers Consider When Implementing Post-Termination Restrictions?

Before including post-termination restrictions in your employees' contracts of employment, keep the following in mind:

1. Seek legal advice: Consult with a legal expert to ensure that the restrictions are enforceable and protect your business interests without being overly restrictive. A solicitor can help you draft bespoke clauses that are clear and effective.
2. Assess the impact on recruitment: Understand that overly broad post-termination restrictions may deter potential hires. Ensure that your restrictions are reasonable and do not unnecessarily limit an employee’s future opportunities.
3. Ensure transparency: Make sure employees are aware of these clauses when they sign their contracts. The more transparent you are about these restrictions, the less likely there will be disputes in the future. Remind employees when they leave of the restrictions they have agreed to. 
4. Consider the consequences of breach: Make it clear in the contract what the consequences of breaching the post-termination restrictions will be, including potential legal action, damages, or an injunction.
5. Carry out a review: Review your existing staff contracts to see if the restrictions are fit for purpose bearing in mind employees’ current job roles. 

Conclusion

Post-termination restrictions are an invaluable tool for protecting your business interests, but it’s essential to ensure they are reasonable and do not amount to restraint of trade. Drafting clear and tailored post-termination clauses helps you maintain control over sensitive information, client relationships, and key staff members.

For further guidance on post-termination restrictions and ensuring your employment contracts are properly drafted, it’s advisable to seek advice from an experienced employment law solicitor.

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Article by

Sally Eastwood

Senior Associate

0800 915 7777

For further guidance on post-termination restrictions and ensuring your employment contracts are properly drafted, it’s advisable to seek advice from an experienced employment law solicitor. 

At Springhouse Solicitors 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.

25.02.25