When they are drafted properly, restrictive covenants can give a significant advantage in protecting your business. They help protect the relationships you have invested time building, reduce the risk of sensitive information walking out the door, and set fair, transparent boundaries governing what happens after someone leaves your business. But here’s the catch: they only work if they are tailored to your business, kept up to date, and actually enforceable in practice.
This guide is for business owners, HR leaders and in-house lawyers who want to get that balance right. We will walk you through what restrictive covenants are, how they are used in both employment and commercial contracts, and what you need to think about before relying on them. Because in reality, this isn’t just about legal wording - it’s about protecting the value of your business as it grows.
If you are reviewing your contracts, putting new protections in place, or dealing with a potential breach, our employment law solicitors can help you take a practical, commercially focused approach to restrictive covenants that actually works for your business.
Jump to:
- Why do employers rely on restrictive covenants?
- When will restrictive covenants be enforceable?
- How should employers approach the drafting of restrictive covenants?
- What types of restrictive covenants are typically used in employment contracts?
- What are the most common breaches of restrictive covenants?
- How can employers identify whether a restrictive covenant has been breached?
- What should employers do if a restrictive covenant is breached?
- Why should employers review restrictive covenants regularly?
- Contractual confidentiality obligations
- Protecting your business with effective restrictive covenants
Why do employers rely on restrictive covenants?
When someone leaves your business, they don’t just take their job title with them. They take relationships, insights, and a working knowledge of how your business operates day to day. In the wrong hands, that can quickly turn into a commercial risk.
That’s why restrictive covenants matter. They give you a way to protect the things that are hardest to rebuild: trusted client relationships, confidential information, and a stable team. Without them, there is very little to stop a former employee from approaching your customers, joining a competitor, or even setting up in direct competition using what they have learned with you.
In practice, restrictive covenants are used to draw some clear boundaries. For example, preventing a departing employee from contacting key clients for a period of time, or stopping them from encouraging colleagues to follow them to a new business. For companies operating in competitive markets, especially where employees are close to clients or have access to sensitive data, that protection can make a real difference.
When will restrictive covenants be enforceable?
The enforceability of any restrictive covenant is decided by a Court, assessing each case on its own particular facts. Because of that, there are no hard and fast rules about what will make a restrictive covenant enforceable, but there are key principles which assist employers when preparing covenants and there are plenty of examples of things that will make a covenant unenforceable.
Under English law, restrictive covenants are only enforceable if they go no further than reasonably necessary to protect a legitimate business interest. That might be client relationships, confidential information, or the stability of your workforce - but you need to be clear on what you are protecting and why. The starting point for a Court is that any term of a contract which restricts an individual’s activities after their employment has ended is void for being in restraint of trade. It’s up to the employer to show that there is a legitimate business interest which requires protection, and that the restrictive covenant that’s in place to protect that business interest goes no further than providing reasonable protection. Courts take a cautious approach because restrictive covenants limit someone’s ability to earn a living. So, they will look closely at whether the restriction is proportionate. That includes things like the employee’s seniority, how wide the restriction is, and how long it lasts.
If a clause is too broad, it won’t be “watered down” to make it reasonable. There is a real risk it simply won’t be enforceable at all, which is why getting the drafting right from the outset is really important, because it will help you set the right foundation if Court action is ever needed.
How should employers approach the drafting of restrictive covenants?
Good drafting starts with a simple question: What are you actually trying to protect? In formal terms, what is your legitimate business interest?
It sounds obvious, but this is where many covenants fail. Restrictions should be tailored to the risks posed by a specific role, not lifted from a generic template. Someone managing key client accounts presents a very different risk to someone in a more operational position and your covenants should reflect that. Identifying the interest that you want to protect is one of the key starting points when preparing restrictive covenants: think about the worst-case scenario of the damage that could be done if someone in a particular role left and joined a competitor. Then think about how you can minimise that damage. For example, a legitimate business interest, such as customer relationships, may need protection if a member of the sales team or key accounts team left. Another example is that maintaining the stable business unit that is the sales team could be a legitimate business interest if a senior sales director left and then tried to approach the team to encourage a move.
Once you have identified the legitimate business interest that needs to be protected, you then need to think about how damage could be done to that interest, so that the covenants can be tailored to guard against the specific risk. For example, does the role in question have access to all key clients, or just some? Do they work throughout the UK and Europe, or just in certain regions? The more specific you can be, the better: imprecise or vague covenants, or covenants which have too broad a scope, are likely to fail simply because of their imprecision.
Timing matters too. Restrictions should last no longer than necessary. This is almost always measured in months, not years. Again, the duration should reflect how long your business realistically needs to protect its position and so it may well vary from role to role. For example, in the recruitment industry, some consultants may be in contact with potential candidates on a frequent basis. This might mean that a replacement consultant can also make contact and re-establish relationships quickly, meaning that a shorter duration is all that is reasonable in order to protect the legitimate business interest that is the candidate pool. Contrast that with, for example, the insurance industry where contact with large corporate customers may only occur once every few months or even less frequently, so that a replacement may have less opportunity to re-establish a relationship quickly. Arguably, this might make a longer duration more reasonable. There are no hard and fast rules, but it’s helpful to ask yourself ‘what’s the worst that could happen if this individual left?’ and then ‘how long will it take to get a replacement in place and fully operational?’. By thinking through the steps that will be needed to protect the business interest, such as sourcing a replacement, allowing them to work their notice period elsewhere and then embedding them into your organisation, you can begin to identify a reasonable period for protection. Of course, if enforcement is needed later on, that thought process is also helpful in explaining to a Court why you imposed the duration that you did, and why you consider it to offer no more than reasonable protection for your business.
And don’t forget… roles evolve. Someone who joins in a junior position may later move into a senior, commercially sensitive role. If their contract hasn’t been updated along the way, your protections may no longer match the risk.
One final point that’s often overlooked: if you introduce new restrictive covenants during employment, you will usually need to provide something in return, a pay rise, promotion, or bonus, for example. Without that, the new restrictions may not be enforceable because there is no ‘consideration’ for them, or put simply, there was nothing given in return for stronger restrictions on the individual.
What types of restrictive covenants are typically used in employment contracts?
Most employment contracts don’t rely on just one type of restriction. Instead, they use a combination, each designed to deal with a different risk.
Non-compete clauses are the most restrictive. They prevent a former employee from working for a competitor or setting up a competing business for a period of time. Because of their impact, they are scrutinised closely and need a strong justification. A non-compete clause on its own won’t be upheld by a Court, so it needs to be combined with other covenants as well.
Non-solicitation clauses are more targeted. They stop former employees from actively approaching your clients, customers, or suppliers to win business, and from encouraging someone else to do so, such as a new employer. These are often easier to enforce because they focus on protecting specific relationships.
Non-dealing clauses go a step further. Even if the client makes the first move and tries to follow their preferred contact, the former employee can’t work with them. This can be particularly useful where relationships are closely tied to an individual rather than the brand.
Non-poaching clauses are another form of non-solicitation clause, but these are about protecting your team. They prevent former employees from recruiting colleagues to join them elsewhere, helping you maintain stability during periods of change. The right mix of restrictions depends on your business and the role in question. There is no one-size-fits-all approach here.
What are the most common breaches of restrictive covenants?
In reality, breaches often come down to relationships. A former employee reaches out to clients they used to manage. Or they join a competitor and start servicing the same accounts. Sometimes, they bring colleagues with them, building a ready-made team in a new business. These scenarios aren’t always obvious at first. But they can have a significant impact if left unchecked, particularly where key accounts or teams are involved.
How can employers identify whether a restrictive covenant has been breached?
Often, if there’s a breach of a restrictive covenant, word of mouth is all that it takes to alert the former employer. A former colleague, a customer or a contact will reveal that they have heard from the former employee, or seen them around with a new employer. Sometimes the clues are more public. A LinkedIn update announcing a new role, or a company announcement about a new hire, can raise questions about what someone is now doing - and whether it conflicts with their restrictions. If the new role might place the individual in breach of their covenants, then it may be time to begin investigating.
If something doesn’t feel right, it’s worth taking a closer look and doing so quickly. That might involve reviewing email accounts, checking file access logs, or identifying whether data has been downloaded or shared externally. This might need to be done with the assistance of specialist IT support, who can identify whether confidential information has been recently accessed, forwarded, printed or deleted. You may also need to speak with clients or colleagues to understand whether contact has been made. Keep in mind, though, that clients may be reluctant to become involved in what they may view as an internal dispute, which means there’s a delicate balancing act to carry out between trying to secure information whilst also ensuring that a client relationship isn’t damaged. The key is to document what you find. If the situation escalates, having a clear record of evidence can make all the difference.
What should employers do if a restrictive covenant is breached?
Speed matters here. The longer a breach continues, the harder it can be to limit the damage. In particular, if an injunction is being considered, a Court will expect to see prompt action and a failure to do so can be fatal to an application before the covenant itself has even been considered.
The first step is usually to get a clear view of your legal position, how strong the restriction is, and what evidence you have. From there, it’s common to contact the former employee (and sometimes their new employer), setting out the concerns and asking for undertakings to stop the activity. This is known as a ‘letter before action’ and it can often be enough to stop a matter in its tracks, as you and the former employee (or their representatives) come to an agreement about what is going to happen going forwards. Often, formal promises known as ‘undertakings’ are sought and given, whereby a party will agree to do, or not do, certain things in the future. Steps like that can mean that costly and risky litigation is avoided.
If the letter before action doesn’t resolve things, you may need to consider court action - often in the form of an interim injunction to prevent further harm while the issue is resolved. This isn’t a step for the faint-hearted: injunction applications move quickly and so do the costs involved, and if your application fails, you could be responsible for the other party’s legal costs too. Taking specialist legal advice is required before you take this step.
A less urgent method of taking action is to warn the employee that you have identified their breach and that you are investigating, with a view to taking action against them for breach of contract. This allows you time to consider any financial losses that might arise as a result of their activities, which might not be immediately apparent, but which can nonetheless be hugely damaging to your business.
Why should employers review restrictive covenants regularly?
It is easy to treat restrictive covenants as a “set and forget” part of your contracts. But businesses don’t stand still, and neither do your risks. As your company grows, and as employees move into more senior or commercially sensitive roles, the level of exposure changes. A clause that made sense at the start of employment may no longer offer the protection you need a few years down the line.
Regular reviews help keep things aligned. They ensure your contracts reflect the reality of your business today, not how it looked when the employee first joined.
Contractual confidentiality obligations
Even if there is insufficient evidence to secure an injunction, or if the drafting isn’t perhaps as clear as you might have hoped, there are also situations where confidential information becomes an issue, client lists, pricing strategies, or internal processes being used to gain an advantage elsewhere.
It’s also sensible to look at the confidential information obligations in the contract of employment. Where confidential information is clearly identified as such, but is nevertheless taken or misused in some way by the former employee, it is possible to consider a claim for damages against them.
Contractual obligations of this nature are separate from restrictive covenants but should also be kept under regular review and maintenance.
Protecting your business with effective restrictive covenants
Restrictive covenants can be a powerful way to protect your business, but only if they are used appropriately and properly. That means clear drafting, tailored to identify and guard against real risks. Regular reviews to keep them relevant. And being prepared to act if a breach occurs. Get that right, and you are in a much stronger position to protect your client relationships, your team, and the value you’ve worked hard to build.
If you would like support reviewing your contracts or putting the right protections in place, our employment contract solicitors can help you take a practical, commercially focused approach that fits your business.
