Understanding Claims Arising from Restrictive Covenants in Contracts of Employment

Restrictive covenants are commonly included in employment contracts to protect an employer’s legitimate business interests, such as confidential information, trade secrets, and customer relationships.

When an employee leaves a company, they may be subject to restrictive covenants that limit their ability to work for a competitor or solicit clients for a certain period of time or within a certain geographic area. If the employee breaches these covenants, the employer may have grounds to pursue legal action against them.

However, enforcing restrictive covenants can be difficult, as they are viewed as a restraint on trade and may be considered unenforceable if they are too broad or not reasonable. Employers must ensure that the restrictions are tailored to the specific employee and their role within the company, and do not place undue burden on the employee’s ability to earn a living.

The duration and geographic scope of the restrictive covenants are particularly important considerations. Employers must ensure that the length of the restriction and the geographic area covered are reasonable and necessary to protect their legitimate business interests. A restrictive covenant that lasts for an unreasonably long period of time or covers too broad a geographic area may be unenforceable.

If an employer wishes to pursue a claim for breach of restrictive covenants, they must be able to demonstrate that the covenants are reasonable and necessary to protect their legitimate business interests. This may involve proving that the employee had access to confidential information or client relationships that could harm the company if misused.

On the other hand, employees who are subject to restrictive covenants may have grounds to defend against a claim if they can demonstrate that the covenants are unreasonable or not necessary to protect the employer’s legitimate business interests. For example, if an employee’s role did not involve access to confidential information or customer relationships, it may be difficult for the employer to justify a restrictive covenant that limits the employee’s ability to work in the industry.

Employees may also argue that the restrictive covenant is unenforceable due to a breach of the employment contract by the employer, such as failure to provide adequate notice of the covenants or changes to the employee’s role or compensation that were not agreed upon in advance.

In some cases, the parties may be able to negotiate a settlement that allows the employee to continue working in the industry while providing reasonable protections for the employer’s interests. However, if the dispute cannot be resolved amicably, the matter may need to be resolved through litigation or alternative dispute resolution methods.

In conclusion, enforcing restrictive covenants can be challenging for employers, and requires careful drafting and consideration of the employee’s role and access to confidential information or client relationships. Employees who are subject to restrictive covenants may have grounds to defend against a claim if they can demonstrate that the covenants are unreasonable or unnecessary to protect the employer’s legitimate business interests. In any case, it is important for both parties to seek legal advice and explore all options for resolving the dispute before pursuing legal action.