Contract Clauses: Post-employment restraints

Post-employment restraints are commonplace in employment agreements.  They are contractual terms which seek to restrict the actions of an employee following the conclusion of their employment and they play an integral role in the protection of an employer’s legitimate interests.

Post-employment restraints are varying and may incorporate limits including:

  • the use of confidential data;
  • the poaching of customers or staff;
  • employment with competitors;
  • employment within geographical areas; and/or
  • the establishment of a competing business.

Where post-employment restraints are missing

Whilst restraint clauses are commonly thought to be unenforceable in a legal setting, this is incorrect and their inclusion in employment contracts should not be overlooked.  Although courts are mindful of public interest, free trade and an individual’s capacity to earn an income, it has been established that they will protect the valid interests of an employer where it is considered reasonably necessary to do so. It is particularly effective if an employer can demonstrate harm to their business as a consequence of the breach.

Drafting considerations

The main feature to consider when drafting restraint clauses is how reasonable the restrictions are.  Particularly in relation to:

  • The time-frame of the restraint, the geographical area of restriction and the nature of the activities being constricted. If the period is considered too lengthy and the geographical area too broad, it is less likely to be considered reasonable.  Cascading clauses may be applied as a means of lessening risk in this regard.  As their name suggests, cascading clauses provide various levels of restraint for varying periods of time and geographical areas.
  • The protection of the genuine interests of the business, the public and the employee.  The clause should seek to provide adequate protection to the employer while at the same time prevent harm to the public. 
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Connor James

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