Types of restrictive contracts to know before you sign your employment offer

Restrictive covenants are generally found in contracts of employment. You can also find these clauses in staff handbooks, offer letters, bonus plans and share schemes.

Put simply, restrictive covenants or restrictions prevent employees from competing with a business after employment ends. To protect a business from departing employees, employers include specific restrictions in the employment contract. An employer is entitled to protect its relationships with its customers, clients, suppliers, and its confidential information.

 

Confidential information

 

This prevents a former employee from misusing or disclosing confidential information belonging to the former employer.

 

Non-solicitation

 

This prevents an employee from attempting to persuade clients to move their business. Usually, solicitation occurs when a former employee contacts a client to encourage that client to move its business from the former employer.

These restrictions should only apply to clients with whom the employee had meaningful contact during the last six months or year of employment.

 

Non-poaching

 

This is a restrictive act that prevent an employee from approaching former colleagues and persuading them to join a new business. These restrictions should be limited to colleagues with whom the employee had meaningful contact recently.

 

Non-competition

 

This prevent the employee joining a business in a role that competes with the business or part of the business in which they were recently employed. Most employment contracts will contain restrictions on the employee exploiting or disclosing confidential information after termination. Confidential information clauses and non-poaching clauses are difficult to police. Therefore, employers use non-compete clauses to protect confidential information in a more effective way.