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Warning over ‘restrictive covenants’ for new staff

Businesses are being urged to investigate any legal restrictions which could be placed on new staff by their former bosses, or face costly legal battles.

Restrictive covenants are clauses built into employment contracts which take effect if the staff member leaves. Typically they prohibit that staff member from directly competing with their former employer for a period of time afterwards.

For instance, they may be stopped from approaching clients of their former employer for 12 months after they leave.

Stephen Crossley, solicitor in the Litigation & Dispute Resolution team at Napthens solicitors, warns that restrictive covenants can cause issues for future employers if they are not discovered early.

He said: “When interviewing potential staff it is always good practice to confirm whether or not their existing contract of employment contains restrictive covenants.

“If they are senior sales staff, for instance, they may well be prevented from approaching their former employer’s largest accounts for some time afterwards. Breaking these covenants, unwittingly or not, can involve lengthy and time-consuming litigation.

“If restrictive covenants are found to be in place, it is always worth having a litigation solicitor review the contract, as in many cases we see, the covenants may not be enforceable.

“For instance, such a clause may be too widely worded – it may try to prevent a member of staff from working within a certain sector for customers in the whole of the UK, something which is just not realistic.

“Tightly written, specific clauses are far more likely to be enforceable, and it is these clauses which businesses must be aware of during the recruitment process.”