What is an Employment Restrictive Covenant and What Impact Do They Have on Workers?

One of the benefits of working in the gig economy is having the freedom to do the work that really matters to you. However, be aware because that there may be a restrictive covenant(s) lurking in your contract which may limit this flexibility. 

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What is an Employment Restrictive Covenant?

A restrictive covenant is a clause that is written into a contract which restricts what you are able to do once that contract has ended. The most common clauses are:

  • Non-competition covenants – which restrict you from working for a direct competitor in a similar role
  • Non-solicitation covenants – which prohibit you from dealing with customers, suppliers and other contacts from your former employer

Why do Businesses Use Restrictive Covenants?

Restrictive covenants are used by businesses to prevent leavers from joining rival companies, poaching workers or taking customers with them to their new workplace. Many businesses use restrictive covenants to protect their legitimate business interests, but some include an excessive number of constraints and conditions which are unlawful.

Businesses use restrictive covenants to protect their business interests

How Can Legal Expenses Insurance Protect You Against the Impact of Restrictive Covenants?

Fortunately, Employment Restrictive Covenants are covered under your Tapoly legal expenses insurance. The claim below perfectly illustrates how this cover can help:

The insured business hired a new member of staff in a very competitive industry through an open and transparent recruitment process. The former employer of the worker alleged that the insured business had breached an employment restrictive covenant and “poached” the employee. Through their insurance policy a specialist solicitor was appointed to handle the matter. Upon investigation it was found that the employee’s restrictive covenant was unreasonable as it restricted their prospects of finding work in the industry beyond 18 months. The matter was settled without litigation at a cost of £1,245 covered by the policy.

Best advice is to ensure that you are aware of any restrictive covenants in your contract and fully understand what the terms, conditions and restrictions are that may impact you. If these seem unreasonable you should discuss them with your employer before signing the contract.

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We Give You Access to a Legal Advice Helpline

You can obtain advice about business-related legal matters within EU law, including restrictive covenants, by calling our legal advice helpline. This is available 24 hours a day, 365 days of the year.