Post termination restrictions in employment contracts

It is an inevitable part of the working world that employees will leave. This can be for any number of reasons, and usually they are amicable partings. But there are, as with many things in business, risks that come with an employee leaving, particularly when they go to, the dastardliest of all things, a competitor. 

It is common to hear of stories about clients being poached from businesses by ex-employees. Clients often have close relationships with the people that they do business with and are sometimes inclined to follow if they leave an organisation. It is also not uncommon for former team mates to be approached by ex-colleagues, or for suppliers to be enticed away. Then of course there is the risk that an ex-employee could leak confidential information and otherwise negatively impact the goodwill and stability of an organisation. In effect there is risk, risk and more risk, particularly when it comes to highly competitive fields. How do you minimise such risk? With well worded contracts of employment, with clear and proportionate post termination restrictions, property clauses and confidentiality clauses. 

This guide serves to highlight the basics of post termination restrictions in employment contracts. 

What are post termination restrictions?

Post termination restrictions are, at their core, a series of bespoke, pre-planned insurance clauses that limit an employee’s ability to disrupt a business upon their exit. While there are some implied restrictions, they are rarely sufficient to protect a business against an employee who has ended their employment. Therefore, post-termination restrictions are used to widen the duties an employee has after they have left an organisation to prevent them taking actions to harm a business.

What do post termination restrictions relate to?

Well drafted post-employment restrictions in an employment contract can prevent an ex-employee from:

  1. Solicitating clients away from the business; 
  2. Tempting other employees away from the business;
  3. Diverting suppliers away from the business; 
  4. Competing with the business for a defined period of time; 
  5. Disclosing the employer’s confidential information; or
  6. Publicly badmouthing the business after leaving

Enforcing post termination restrictions

When enforcing post-employment restrictions, an employer must show that they have a legitimate business interest which they are trying to protect, and that the protection sought is proportionate in light of the interests of the parties and the public interest. Failing to show that the restrictions are proportionate means that such terms are void. Ultimately, restrictions must be no wider than necessary. 

Breaching post termination restrictions

If the terms are deemed enforceable, and the company wishes to do so, then an employee in breach of their restrictions may find themselves defending themselves against applications for injunctions. This is a very costly type of litigation which can also result in the employee being bound by court ordered injunctions. The losing party will often bear the costs of all parties, including legal fees.

How Moore Barlow can help 

If you have been offered a deal as an employee that contains post-employment terms, or would like assistance in drafting such terms, then please feel free to contact the Employment law team at Moore Barlow.