Post-Termination Restrictions: Supreme Court to the Rescue
18th July, 2019
Céline Winham considers recent Supreme Court case which clarifies enforcement of post-termination restrictions in contracts of employment
By Andrew Knorpel on 3 December 2015
We’ve been told by the weather forecasters that “meteorological winter” started this week. So, as we enter the fourth season of the year, we think back to the songs of the Four Seasons and, in particular, when they sang “Let’s hang on to what we’ve got; don’t let go girl, we’ve got a lot”.
If you’re anything like me, this immediately makes you think of post-termination restrictions in contracts of employment – there’s a song for almost everything in employment law.
Whenever I draft these type of restrictions, I preface them by something along the lines of “In order to protect the workforce stability of the Employer, together with the Confidential Information, trade secrets and business connections to which the Employee has access as a result of his employment”. These are all legitimate business interests which the employer has a right to protect.
We’re often asked by both employees and employers whether it is possible for an employer to enforce a restriction against an employee if it stops them from working in the only industry that they know. The answer is a resounding “Yes” – provided that any restriction goes no further than is reasonable to protect each of the employer’s legitimate business interests.
If we take business connections, you would usually need to limit non-dealing and non-solicitation of customers restrictions to those with whom the individual has dealt in recent times. They should also be for as short a period as is necessary to ensure that you can make every attempt to retain the customer. Looking at non-solicitation of staff, you would be looking at those staff who could damage the business if they left and with whom the employee had some connection during their employment. Once again, the duration of the period of past connection and the duration of future prohibition must be reasonable.
The hardest restriction to enforce is a non-competition restriction as this is the most onerous on the employee. If you think that a combination of other restrictions simply isn’t enough to prevent the employee from being able to damage your business in light of the confidential information which resides in their head (such that they would have an unfair advantage over your business if they started in competition), only then is such a restriction likely to be enforceable. Of course, limiting the restriction in duration, scope and potentially geographical area of operation will all be relevant to ensuring that the restriction is no more that reasonably necessary to protect your business.
So if you want to hang on to your confidential information, business connections and stable workforce, don’t just let them go by not having any enforceable restrictions. Protect your business as you’ve got a lot.
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