Post-termination restrictions govern the parties’ conduct at the end of a contractual relationship. Clauses of this type most commonly appear in employment contracts, but also in shareholder agreements, partnership and LLP agreements, franchise agreements and agreements for the sale of a business. They typically fall into four categories:
- restrictions on future competition;
- restrictions on the solicitation of customers or clients;
- restrictions on dealing with customers or clients; and
- prohibitions on poaching directors, employees or consultants.
There is a wealth of case law on how the enforceability of these clauses is determined. Any given clause must be reasonable: it must protect a legitimate business interest, such as confidential information, customer connections or workforce stability, and go no further than is reasonably necessary to do so. If it goes further, it is void as an unreasonable restraint of trade and the court will not enforce it, although in some cases the court can sever the offending words.
In certain cases the innocent party can also bring claims against third parties, for example the new employer of a former employee, where it can be shown that they induced the breach or knowingly benefited from it.
How we help employers and businesses
- Drafting and reviewing restrictions so that they are enforceable
- Advising on whether an exiting employee, director or partner is in breach
- Urgent applications for interim injunctions to restrain breaches and preserve evidence
- Claims for damages or an account of profits against the individual and any new employer
- Managing team moves and protecting confidential information
How we help individuals
- Advising before you resign on what your contract does and does not prevent
- Negotiating releases or variations of restrictions
- Defending injunction applications and claims for damages
Clive Hyer has acted in reported cases on post-termination restrictions and employee signing-on bonuses and leads this work.