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Is it possible to stop employees moving to the competition?

Posted on: April 20th, 2022 by Halborns Limited

Clients often tell us that post-termination restrictions (otherwise known as restrictive covenants) are never enforceable – we beg to differ. We always explain that well-drafted, up-to-date covenants that don’t go beyond protecting ‘legitimate business interests’ are enforceable. A recent High Court decision shows that in some cases even non-compete clauses lasting 12 months are capable of enforcement in respect of senior employees.

Background 

A director had resigned from her role in order to move to a direct competitor and had created a ‘business plan’ for her new role with how she would transition clients worth £250,000 a year to the new employer. She tried to argue that her non-compete clause with her previous employer was unenforceable. The High Court disagreed – her previous employer was entitled to protect client connections that had been secured by her for 12 months.

Practical takeaways 

Legitimate interest – be clear about the specific interests you want to protect. In this case, the previous employer only sought to protect their legitimate business interests with a non-compete clause relating to the services that they provided and the specific geographical location in which they operated.

Be specific – casting the net too broadly will likely render restrictions unenforceable. In this case, the previous employer had limited their restrictions to prevent former employees from working in direct competition with them in the North West of England and Hertfordshire for 12 months. The High Court held that this was no wider than reasonably necessary to protect their interests.

Poorly drafted post-termination restrictions may not be worth the paper they’re written on – get in touch to review and update yours to ensure you’re securing the maximum protection possible. 

 

This update is accurate on the date it was published (21 April 2022), but may be subject to change which may or may not be notified to you. This update is not to be taken as advice and you should seek advice if anything contained within affects you or your business.