What is a non-compete clause?
Non-compete clauses usually apply throughout an employee or partners’ tenure with a company or firm, seeking to prevent conflicts of interest and seeking to ensure that the employee or partner is loyal to the company’s business.
Restrictive covenants can be in place to restrict the activities of a former employee or partner after their employment/partnership/membership has terminated.
These clauses often prevent such a person, for a fixed period of time after their employment/partnership ends, from:
- Competing within a competitive business in a certain geographical area or business sector;
- soliciting clients/suppliers away to a new business;
- recruiting other employees from the business; and
- ‘non-dealing’ clauses, i.e., precluding you from working with certain clients for a period of time.
Importantly, the courts will only enforce such clause if it is reasonably necessary to protect a legitimate interest of the business/partnership. In addition, your contract of employment/LLP Agreement may include a provision that off-sets any time spent during garden leave with the length of time that you are expected to comply with the post-termination non-compete clause.
Share Purchase Agreements can also contain non-compete clauses/restrictive covenants – and given the nature of the relationship such restrictions may be easier to enforce. Whether you breach restrictive covenants may be relevant to any definition of bad leaver in any LTIPs
Farore Law is a leading boutique law firm that has a wealth of experience in advising senior executives on employment matters. We are well placed to provide appropriate advice regarding the enforceability of contractual terms, seeking a settlement agreement and commencing or defending litigation in the High Court or the Employment Tribunal.
Please contact us if you require legal advice.