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Why Restrictive Covenants in Employment Contracts are necessary

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Lawson-West Solicitors - Expert Author

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Issued 2nd December 2009

A recent survey of 600 workers in Canary Wharf and Wall Street found that 41% of employees had taken data from one job to another. The most popular kinds of information to be taken are customer and contact details, business plans and proposals and then product details. The survey, by Cyber-Ark Software, also found that 13% of employees would take usernames and passwords so that they could access information later.

Some information will be covered by copyright, trade secret laws or the Data Protection Act and there is an implied term of trust and confidence in employment contracts so such theft is likely to breach employment contracts and be subject to disciplinary action. However, of the employees surveyed 85% were aware that it is illegal to download corporate information.

So how can employers protect themselves from data thefts? Technical solutions such as blocking access to edit or download data to certain types of employees can be complex, expensive and don’t necessarily offer full protection. However Restrictive Covenants in employment contracts can make it clear that such theft is unacceptable and can protect employers’ interests.

Restrictive Covenants can:-

  * Restrict use of confidential information to prevent former employees using confidential information in new jobs;

  * Restrict employees working for a competitor or directly competing with a former employer’s business, usually restricted to a set period or within a certain geographical area;

  * Restrict employees approaching customers and encouraging those customers to do business with a new employer instead;

  * Restrict employees poaching former colleagues for their new employer.

However, restrictive covenants must be reasonable otherwise they can be legally unenforceable. How reasonable a restrictive covenant is will depend on the nature of the employee’s job, the seniority of the employee, whether the employee is local or covers a wide geographic area and whether the restrictive covenant covers all employees or just employees in certain roles.

Lawson-West recommend that employers consider using restrictive covenants in employment contracts but seek legal advice first to ensure that any proposed restrictive covenant is reasonable and so legally enforceable.


About the Author

Lawson-West specialise in commercial, business and employment law. Our team of dedicated commercial solicitors can help with buying or selling a business, business law and disputes, landlord and tenant issues and commercial property. Our expert employment team can offer practical advice and guidance on all aspects of employment law including redundancy, compromise agreements and dismissal procedures. Visit www.lawson-west.co.uk for more information.



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Article Published/Sorted/Amended on Scopulus 2009-12-11 15:52:01 in Legal Articles

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