RESTRICTIVE COVENANTS

The general rule of thumb for restrictive covenants are that they are deemed to be in restraint of trade and hence contrary to public policy. Common types of restrictive covenants include non-competition, non-dealing, non-solicitation and non-poaching.  There are in effect two situations where restrictive covenants will apply, namely during and after employment. Covenants during employment are more likely to be enforceable than those once employment has terminated. Non-competition and non-dealing clauses may effectively stop a former employee from gaining employment in a particular field of business and are therefore looked at most unfavourably by the Courts. Non-solicitation clauses gain more sympathy from the Courts provided the former employer has a legitimate business interest to protect. Should an employer (ex employer) seek to enforce such a covenant, the usual remedy is to initially seek injunctive relief and couple this later with a claim for damages for breach of contract. From a practical perspective only those clauses that have been narrowly drafted so as to provide an employer just enough protection are more likely to succeed than those that are very widely drafted. Consequently the use of “standard” clauses is frowned upon as these are normally widely drafted and bear little resemblance to the actual needs of the employer.