Q&A I have restrictive covenants in my contract, does that mean my employer stop me working for a competitor?

Q: I work for a recruitment consultancy as a head-hunter. I am keen to move to another recruitment company, but I am concerned about my restrictive covenants in my employment contract. Can my current employer really stop me working for a competitor?

A: More and more recruitment companies are using restrictive covenants as a means to protect their business from departing employees. If the covenants are well drafted so that they are tailored to protect the legitimate business interests of the company, they may well be enforceable and so may impact on your future employment prospects.

The first step you should take is to read your contract and understand what it is seeking to prevent you from doing. There are various types of restrictions which may impact on your future employment in different ways:

• Non-compete: This is the most onerous form of covenant. It will stipulate that you cannot work for a competitor for a fixed period. Because this type of covenant may actually prevent you from working for a fixed period of time, it is generally the most difficult type of covenant to enforce.
• Non-solicitation: This type of covenant will prevent you from soliciting or enticing away from your employer, third parties such as clients, candidates, suppliers and other employees. This is a popular from of covenant and it usually extends to direct or indirect solicitation, so that you cannot ask a colleague from your new employer to solicit anyone on your behalf. This type of covenant does not actually prevent you from dealing with third parties who contact you, provided you do not solicit them. It does not, therefore, offer as much protection to your employer as other forms of covenant.
• Non-dealing/non-employment: This type of covenant will prevent you from actually working for third parties such as clients, candidates and suppliers, or from employing other employees. This can be a highly effective covenant from the employer’s perspective, as it means that even if a third party contacts you, you cannot accept their business.

If you are concerned that your covenants may affect your future employment prospects or working for a competitor, then you should take specific legal advice. When dealing with restrictive covenant issues, it is usually better to take advice at the outset, before you go approaching clients and candidates. You may be able to find a workable solution to the issues you are facing and avoid the prospect of litigation. It can be highly stressful to receive a letter from your employer threatening litigation.

Your solicitor is likely to consider the following issues, to help them to determine if your covenants are enforceable:

• Whether the period of the covenant is reasonable in the circumstances. Generally, the covenant should only protect your employer for as long as is necessary to enable it to reaffirm its relationships with third parties such as clients.
• Whether the covenant prevents you from acting for a competitor in any role. Arguably, your covenants should be limited to you acting in a competing role.
• Whether other employees within your company are subject to the same covenants. If your colleagues do not have similar covenants, you may be able to challenge them on this basis.
• Whether your employer will have an ongoing business to protect if you leave. If there is no legitimate business interest left to protect, your covenants may not be enforceable.
• Whether there is a facility to offset any period of garden leave. If not, your covenants may be unnecessarily long and therefore unenforceable.
• The geographical scope of the covenant. If you only operate within a limited area, a broader geographical restraint may be unreasonable.