x
Our website uses cookies. By continuing to use the site, you agree to our use of these cookies. To learn more about how we use the cookies and how you can manage them, please see our cookies policy.
Types of post-termination restrictions & your options if they are breached
Post-termination restrictions are put in place as part of a settlement to keep an ex-employee from sharing data relating to your business with other parties. Such restrictive covenants can also be used to keep ex-employees from working for competitors within a certain radius, or from taking clients with them when they move roles. This helps to keep your data safe and out of the hands of competitors.
Here, we look at why employers put post-termination restrictions in place, what the different types of post-termination restrictions are and what to do if an ex-employee breaches these covenants. We also explore the benefits of seeking legal advice from employment law experts and cover some common queries.
Click on a link to that section:
Find out the importance of post-termination restrictions.
Read the key types of post-termination restrictions for ex-employees.
Find out what your options are if your post-termination restrictions are breached.
Read the key benefits of seeking legal advice in an employment dispute.
We answer common queries on post-termination restrictions.
Why do employers make post-termination restrictions?
Post-termination restrictions are very common when it comes to settlements, although they are sometimes written into an employee’s contract. It is in your best interests as an employer to put these in place, as they can help to protect your trade secrets and delicate or confidential information. You will also wish to protect your customer base, ensuring that the connections you have made are not exploited by an ex-employee. It can also be useful as a way of keeping your workforce stable, as employees will not be able to leave to work for or with an ex-employee. This is especially useful in cases where your employees have their own customer bases and loyal following.
What are the different types of post-termination restrictions?
There are different types of post-termination restrictions in place. General confidentiality covenants are a broad form of restriction which keep ex-employees from revealing sensitive details of your business and clients.
A non-solicitation clause means that an ex-employee cannot approach your current clients or staff once their term of employment has ended. Non-dealership is similar but distinct in that this clause will keep ex-employees from entering into a business transaction with your current clients, and is designed to restrict them from “poaching” customers.
Finally, a non-compete agreement will prevent employees from leaving your company and moving to a competing company, or setting up their own freelance business in the same geographic area or professional field.
Read how Giambrone & Partners can help with all matters related to employment contracts here.
What can you do if an ex-employee breaches post-termination covenants?
If an ex-employee breaches post-termination covenants, this can have serious implications for your business. You may wish to approach your ex-employee about this, and the best way to begin is with alternative dispute resolution (ADR). This can be done through mediation, meaning that you and your ex-employee can have a discussion in the presence of a mediator and come to a non-legally binding agreement about how you will proceed. The other option, if mediation fails, is arbitration, which is similar to mediation, but the agreement you come to will be legally binding.
If these options fail, it may be necessary to proceed to court. In this case, a law firm can represent you and make your case for you; the decision will be made for you by a judge and will be legally binding. The outcome is not guaranteed to be in your favour, and this can be an expensive and time-consuming process, so this should only be pursued as a last resort, or in serious circumstances.
Has an ex-employee breached your post-termination covenants? Contact us to find out how we can assist you.
The benefits of seeking legal advice
When drafting post-termination restrictions, it is important to make sure you have covered all eventualities, making sure that the restrictions are clear to the employee. It is best to seek legal advice when drafting post-termination restrictions, as the qualified lawyers at Giambrone & Partners can advise you on what to include in the restrictions and what to do if an ex-employee breaks these agreements. Giambrone & Partners is experienced with employment contractual disputes and commercial contracts, so get in touch for legal advice and support.
Do you need assistance in putting together post-termination restrictions? Contact Giambrone & Partners today for assistance.
Common queries
How does the court impose post-termination restrictions?
The court will look at how necessary your post-termination restrictions are, and check that they are not considered too “wide”. The court will be able to legally enforce your restrictions as long as they are legitimate and do not restrict your ex-employee unreasonably (for example, from starting a business of their own).
How enforceable are your post-termination restrictions?
A court can impose post-termination restrictions if they are found to be fair and reasonable, not too broad (for example, you may be able to restrict an ex-employee within a certain radius only, rather than being able to restrict them country-wide).
When should legal action be taken?
Legal action should be taken when an ex-employee has breached their agreed restrictive covenants, especially if ADR has been unsuccessful.
Who should have such restrictions imposed upon them?
Restrictions should be imposed on employees who are leaving your business with a settlement in place or those who have been made redundant. Certain restrictions are in place with general employment contracts, so that an employee understands the restrictions placed on them from the beginning of their employment. These restrictions are common in many industries but can be especially prevalent in sales fields where clients may have loyalty to a certain staff member, or fields such as law where sensitive information may be handled.
What types of restrictions should an employer consider?
An employer should consider utilising general restrictions, and a non-solicitation restriction to restrict the amount that an ex-employee can interact with clients and existing staff. This can be useful if their employment has ended on bad terms. A non-dealership agreement is also useful, especially in sales environments, and a non-compete agreement is fairly standard.
Why are restrictive covenants used?
Restrictive covenants are used in order to protect a business and ensure that they do not lose clients or data.
What happens if an employee breaches an employment contract?
If an employment contract is breached, it should be dealt with informally in the first instance, potentially with disciplinary action. However, if this is not satisfactory, it may be necessary to pursue ADR and perhaps even legal proceedings, such as an employment tribunal.
Related content
Drafting an employment contract