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Restrictive covenants: what actually holds, and what enforcing one costs

A senior person has resigned and is joining a competitor, and the first thing anyone reaches for is the non-compete in their contract. That clause is usually the least reliable part of the employer's position, and treating it as the answer is how a business talks itself into an expensive decision.

In England and Wales a clause restricting where a person may work after they leave begins as void. It becomes enforceable only if the former employer can show a legitimate interest worth protecting, and that the restriction reaches no further than is reasonably necessary to protect it. That assessment is made by reference to the position when the contract was entered into, not by reference to how badly the departure has since gone.

The usefulness of the clause was therefore fixed on the day it was signed, at a point when nobody was contemplating this. It is common to find that the person now regarded as dangerous signed a contract drafted for a much more junior role, and that nothing was revisited when they were promoted into the relationships the business is now worried about.

There is a second point that surprises people. The clause that looks most formidable on the page is frequently the one least likely to survive. Firmness of drafting carries no weight of its own, and a restriction written to cover every eventuality is considerably weaker than one that asks for very little.

What a restraint is permitted to protect

The interests the courts in England and Wales have been prepared to recognise are reasonably narrow: genuinely confidential business information, the connection built up with clients and suppliers, and the stability of a workforce that a departing person could otherwise strip out. Competition in itself is not one of them. An employer who cannot say what is being protected beyond the fact that a capable person has gone to a rival is usually in difficulty before anything else is examined.

The distinction most often misread is the one between confidential information and the individual’s own skill. Everything a person learned about doing the job well leaves with them lawfully, and general professional competence is not treated as the employer’s property however expensively it was acquired. What may be protectable is far more specific. In practice what is carried out of the door is rarely a document at all, but knowledge of which accounts are quietly dissatisfied, where the pricing floor sits, and when the contracts come up. That is exactly the sort of knowledge a business struggles to describe in evidence, which is why cases that feel obvious internally can look thin once they are written down.

Reach is assessed against the role as it stood

The temptation when the contract is drawn up is to reach for everything: the longest period anyone has heard of, every company in the group, any competing business wherever situated, and every client rather than only those the person actually dealt with. Each of those extensions makes it harder to say the restriction goes no further than necessary, and the excess is judged against the role as it stood when the contract was made.

The consequence is not that a court tidies the clause into something sensible. The scope for severing an unreasonable part is limited: discrete wording can sometimes be removed where what remains still stands on its own and the character of the bargain is unchanged, but a restriction is not rewritten into a reasonable one because the employer would have liked it to be. An employer that asked for too much may be left with nothing enforceable at all, while a narrower restriction in somebody else's contract survives.

This matters commercially long before anyone reaches a courtroom. Most of these situations are settled by an arrangement between the two employers about which clients will be approached and on what footing. In that conversation, a modest covenant the other side’s advisers regard as sound produces real concessions, because nobody wants to test it. A sweeping one produces a courteous reply explaining why it is unenforceable, and the discussion ends there.

The covenant is rarely what decides it

The written restraint is the most visible part of the position and often not the strongest part of it. While still employed, a person owes duties of loyalty to the employer, and a director or someone in a genuinely senior position may owe more demanding obligations again. Confidentiality obligations can continue after the employment ends without depending on the covenant. Notice provisions, including arrangements that keep someone away from clients while their notice runs, commonly called garden leave, do work that a post-termination clause does not.

What decides these matters is more often conduct while the person was still on the payroll than the wording anyone is arguing about. Preparing a competing venture using the employer’s time and information, copying client material before resigning, or sounding out colleagues about joining: these are the things that change the temperature of a case, and where an unfair head start has been obtained, the courts in England and Wales have been willing to restrain the advantage even where the covenant itself is doubtful.

That part of the picture is also the part most likely to have disappeared by the time anyone looks for it. Mailboxes are recycled, laptops are wiped and reissued to the next joiner, and access records roll over as a matter of ordinary system housekeeping. Whatever else is decided in the days after a resignation, nothing belonging to the departure should be cleared, reassigned or handed on until somebody has considered what it would show. Pausing that housekeeping commits the business to nothing, and once the material has gone it cannot be brought back.

What enforcement actually invites

A covenant is enforced by asking a court in England and Wales for an injunction, an order requiring the person to stop doing something, and usually urgently, because the value of a restriction decays while it is being argued about. Speed is bought at a price. An applicant for interim relief is ordinarily required to promise the court that it will compensate the other side for losses caused if the restriction turns out to have been wrongly imposed. In plain terms the employer is underwriting the departing person’s earnings, and potentially their new employer’s losses too, on the strength of a clause that has not yet been tested.

The process is also far more public than businesses expect. The evidence has to set out which clients the business regards as vulnerable, what those relationships are worth and why it fears they might move. That is a description of the soft parts of the business, prepared at speed and read closely by a competitor. Clients are frequently asked to give evidence about their own dealings, and being invited to swear a statement about your supplier is not a neutral experience. Some decline. Some conclude the relationship is more precarious than they had realised, and begin the review they had not previously been planning.

There is an internal effect as well, and it is the one most often left out of the calculation. Everybody still employed signed something similar and is watching. An enforcement that holds settles the question across the whole workforce without another word being said. One that fails in public settles it in the opposite direction, permanently, and better drafting afterwards does not undo it, because the people the clause exists to deter have already seen it tested and beaten.

The departures that deserve no response

A good number of these departures deserve no response at all. Where the person held no real client connection, where nothing they knew meets any honest description of confidential, or where the accounts causing the anxiety were already reviewing their arrangements, there is nothing worth an application. The same is true where so much of the restricted period will have run by the time any hearing could deal with it that an order would restore very little at considerable expense.

It is also worth being honest about who is on the other side. Proceedings against an individual who cannot fund a defence seldom run as intended. The matter may resolve on terms that mean little against someone with nothing to give, and the business acquires a reputation among exactly the people it is trying to recruit next. Where the new employer is substantial, the fight is really with them, and a well advised acquirer of talent may simply decide the cheapest resolution is to hold the person out of the market on full pay and wait for the restriction to expire, which leaves the former employer having spent heavily to reach the point the calendar was taking it to anyway.

The judgement worth making concerns which of the specific things now at risk, a named group of accounts, a piece of commercial information, a team that could be hollowed out one resignation at a time, would still matter once the departure has settled and the noise has gone out of it. That question is answered by examining the business rather than the contract, and it is the assessment owners are least well placed to make about themselves, because a trusted person's resignation is felt long before its commercial effect can be measured.

This guide is general information about how these matters usually run. It is not advice, and nothing becomes advice until terms are agreed in writing. Brandleys Legal Ltd delivers reserved legal activities alongside regulated partners.