When a senior employee leaves to join a competitor, the first question is usually whether their restrictive covenants can be enforced. Too often the answer is uncertain, because the covenants were copied from a template, have not been reviewed since the employee joined, or go further than the business actually needed. Well-drafted covenants are one of the most valuable forms of protection an employer has, but only if they are designed to survive scrutiny.

The starting point: restraint of trade

Post-termination restrictions are a restraint of trade and are unenforceable unless the employer can show two things. First, that it has a legitimate business interest to protect. Second, that the restriction goes no further than is reasonably necessary to protect that interest. Reasonableness is judged at the date the contract was entered into, not at the date the employee leaves, which is why covenants agreed on day one can become unsuitable as a career progresses.

What counts as a legitimate interest?

The courts recognise a limited number of interests. The main ones are confidential information and trade secrets, relationships with customers and clients, relationships with suppliers, and the stability of the workforce. A general wish to avoid competition is not enough. The covenant must be linked to something the employee has actually had access to or influence over.

Drafting for the role

The most common reason covenants fail is that they are not tailored. A six-month non-compete may be reasonable for a senior salesperson with deep client relationships but excessive for a junior employee. Points to consider include:

  • The duration of each restriction, which should reflect how long the confidential information or client connection will remain valuable.
  • Any geographic scope, which should match the area in which the employee actually worked.
  • The clients or employees covered, ideally limited to those the individual dealt with in a defined period before leaving.
  • Whether the business activities restricted are defined precisely enough.

Following the Supreme Court's decision in Tillman v Egon Zehnder in 2019, a court may remove words from a covenant to make it enforceable, but only where what remains still makes sense and the change does not alter the overall effect of the restriction. That is a safety net, not a drafting strategy. Separate, clearly drafted restrictions give the court the best chance of upholding at least part of the protection.

Keep covenants under review

Because reasonableness is tested when the contract is made, covenants should be reviewed on promotion or a material change in role. New covenants should be supported by fresh consideration, such as a pay rise, bonus eligibility or share award, clearly linked to the new terms. Simply issuing an updated contract without anything in return risks the new restrictions being unenforceable.

Garden leave as an alternative

A well-drafted garden leave clause allows the employer to keep the employee away from work and clients during their notice period while they remain employed and bound by their duties. Garden leave is often easier to enforce than a post-termination non-compete. Contracts can also provide that time spent on garden leave is deducted from the length of any non-compete, which strengthens the argument that the overall restriction is reasonable.

Watch for reform

The use of non-compete clauses has been the subject of policy discussion for several years, including proposals to limit their length. Employers should keep an eye on any legislative change, but the fundamentals will remain: restrictions that are targeted, proportionate and regularly reviewed will always be more defensible than broad ones.

What employers should do now

To make sure covenants will hold when they are needed, employers should:

  • Audit covenants for senior and client-facing roles rather than relying on a single template.
  • Link each restriction to a specific legitimate business interest.
  • Review covenants on promotion and provide fresh consideration for new terms.
  • Include clear garden leave provisions and a set-off for time spent on garden leave.
  • Keep records of the confidential information and client relationships each role involves.

Key takeaways

Restrictive covenants are only as strong as their drafting. Tailored, reasonable restrictions, reviewed as roles change, give businesses real protection. Generic templates frequently fail at exactly the moment they are needed.

If you would like us to review your covenants, or you are dealing with a departing employee, please contact Employment partner Sophie Marchant.