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Post-termination restrictions in employment contracts: what happens if they are breached?

Many employment contracts contain covenants that restrict an employee’s actions after the employment has come to an end (usually for a specified period of time).

Restrictive covenants

Examples of this type of clause include:

  • Non-solicitation, which prevent ex-employees from soliciting the employer’s clients or customers;
  • Non-dealing, which prevent ex-employees from dealing with the employer’s clients or customers; and
  • Non-competition, which can (among other things) prevent the ex-employee from working near the employer or for a competitor.

If the ex-employee breaches one of these types of terms in a restrictive covenant, employers can apply to the court for an interim injunction to stop the breach from happening. Lyons Davidson is regularly instructed by both employers and ex-employees who find themselves in this situation.

Breach of contract

If you are an employer drafting or seeking to enforce the terms of a contract or you are on the receiving end of a claim for breach of contract, here are some points to bear in mind:

  • The court will not always enforce the restrictions contained in employment contracts. To do so, it should be satisfied that the restrictions protect the employer’s legitimate business interests and do not go any further than necessary to protect the employer.
  • The employer should have evidence, on the face of it, that they have a good case that the ex-employee has breached the contract.
  • Before the court will grant an injunction, it will usually require the employer to undertake to pay the ex-employee damages for any loss that they suffer as a result of the injunction, if the court later finds (at a trial, for example) that the injunction was wrongly awarded.
  • If an employer intends to apply for an interim injunction they should act promptly. The court will often take any delay into account when deciding whether to grant an injunction.
  • If the court grants the injunction, it is important that it is complied with. Disobeying the injunction usually carries a sanction of contempt of court, which could result in the person in breach being fined or imprisoned.

Interim injunction

Applications for interim injunctions are not always straightforward for either party. It is often preferable – and more economical – for parties to reach an agreement before injunction proceedings are commenced. For more information on employment contracts, please contact Lyons Davidson’s commercial litigation team on 0117 904 6000.

Posted on Sep 11th, 2014 by Lyons Davidson

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