The deadline for responses to the BIS call for evidence in relation to the use of restrictive covenants expires on 19 July.
The Call contains no hard evidence at all to support any suggestion that covenants stifle start-ups. It admits that this is only an assumption, though even those are normally based on something. It also pays no obvious heed to logical inevitability that if one business benefits from limitations on the use of restrictive covenants, another must suffer, itself potentially a start-up knocked sideways by the departure of a key employee to the competition.
Spoiler alert – neither we nor our survey respondents could come up with any convincing reason to change the law relating to covenants, let alone any actual practical means of doing so, without creating colossal peripheral damage to industry and enough satellite litigation to fill the Courts for years.
There might possibly be a case for some ACAS code-like guidance on the use of covenants. This could be some principle-based pointers which could focus employers’ minds on what they needed and where non-compliance would not necessarily be fatal to enforceability but would at least require a good explanation.
Instead or in addition, BIS’ repeated references to a lack of transparency in covenants (again sadly unburdened by any actual, y’know, evidence) might also suggest a push to require contracts containing restrictive covenants to be formally – perhaps independently – explained to the employee pre-signing. Is it just me, or would you expect the sort of employee likely to generate protectable interests for covenant purposes not to read their contract first or, having read it and miserably failed to understand it, to sign up anyway?
We shall see what comes of it all, if anything. In the meantime, here is our Response containing some fuller commentary on the questions in the Call.