Important and/or distinctive aspects of rights on termination in the UK
Protecting confidential information
During employment, employees are required to keep the affairs of their employer secret. After termination of employment, this duty only applies to information that is strictly confidential and in the nature of a trade secret. Any wider restriction must be expressly agreed with the employee.
Keeping employees out of the business
Placing an employee on garden leave allows an employer to instruct the employee to stay away from the business, colleagues and suppliers/customers, which can be a useful way of limiting both their access to information about the business and more generally eroding their up-to-date knowledge about a sector. If the termination is at a critical time (for example, where an employer is developing new marketing strategies), garden leave may be more appropriate and provide better protection.
The starting position in the UK is that any contractual term restricting an employee’s activities after termination is void for being in restraint of trade and contrary to public policy. This is unless the employer can show that:
- the restriction is intended to protect a legitimate business interest (such as protection of trade secrets, other confidential information or trade connections (with suppliers or customers), goodwill); and
- the protection goes no further than is reasonable having regard to the interests of the parties and the public interest.
Employers must determine the level of protection reasonably necessary for each employee. What is appropriate for one individual may not be appropriate for another, depending on their job role, level of seniority, contact with customers and/or knowledge of confidential information.
Restrictions must be limited by reference to the length and (if appropriate) the geographical extent of its application. UK courts would consider the relationship between the length, any specific geographical area, the area of activities of the employee and the potential value / harm to the business. Restrictions that are too broad may be deemed void, and the courts will not re-write a restriction to make it enforceable. The greater the length or geographical scope of a restriction, the greater the restriction on trading and therefore the more likely it is that the restriction will be deemed unenforceable.
Preventing employees going to competitors
Employers are not permitted to simply prevent employees going to competitors full-stop; they must identify a specific risk in a particular employee joining a competitor within the restricted period. Non-competition provisions are generally viewed by the UK courts as the highest level of protection and the harshest for employees affected. It is common to see shorter non-competition provisions compared to other restrictions, as a trade-off for enforceability.
Protecting trade connections (e.g. with customers, suppliers and other “contacts”)
It is common for employers to include a non-solicitation restriction (preventing the employee from actively soliciting business) in tandem with a non-dealing restriction (preventing any type of contact with customers). These restrictions should be limited to parties with whom the employee had contact during a specified period before termination, commonly 6-12 months. Restrictions which purportedly apply to prospective contacts are generally harder to enforce.
Protecting the workforce
A non-poaching or non-solicitation restriction preventing an employee enticing or poaching other employees (or key contractors) may also be enforceable, if the business can show a legitimate interest in maintaining a stable workforce. We are seeing increasingly creative provisions around contact with former colleagues as employers seek to prevent team moves and other business risks.
Breach of contract by the employer
Post-termination restrictions will not bind if an employer terminates in breach of the terms of employment (for example, without giving notice). Employers must be careful in the way in which they end an employment relationship if it is important for the restrictions to survive termination.
Enforcing a restriction
By seeking a court injunction obliging the employee to comply with the restrictive covenant and/or seek damages for breach of it, which is usually expensive and time consuming. Prior to any court action, the employer should write to the employee and other parties highlighting the restriction and the employer’s intention to take action for any breach, which commonly results in compliance or negotiation between the parties.