Employment – Restrictive covenants

6.8.4.L8 Updated on:13 October 2021

Restrictive covenants

Some employees have a term in their contract of employment that restricts the type or place of employment they may go to when leaving a job. This is called a restrictive covenant. Restrictive covenants are common in jobs that depend on building good customer relations such as in sales.

An employer may want to stop an employee taking their customers to another business and so will write into the contract of employment a term that says, for example, that an employee when leaving the job may not work in a similar business within a radius of 10 miles.

An employer may also want to stop an employee taking information they have learned in the job to another business. They may write into the contract of employment a term that says, for example, the employee may not work in a similar business for one year.

If an employee takes a job, or sets up a business, that is in breach of a restrictive covenant the employer may apply to the courts for an injunction to force the employee to stop working in the new job or business. If the employer can prove that they have suffered a financial loss as a result, for example, lost customers, they may also be able to claim damages.

The courts will only enforce a restrictive covenant by granting an injunction if they believe that it is reasonable and in the public interest. A court will look at the facts of each case when deciding whether or not the covenant is reasonable and in the public interest.