How to draft restrictive covenants

Updating author: Catherine Rawsthorne, DAC Beachcroft
Original author: Jo Plumstead

Summary

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• Make sure that the clause becomes part of the contract from the outset. If attempting to introduce a clause after employment has started, ensure that the employee consents.
• Draft individual clauses for each employee or limited class of employees. Do not try to impose a blanket covenant on everyone.
• In each case, consider what business interest(s) you are seeking to protect and tailor the clause accordingly.
• Consider whether the clause should cover competition during employment or after employment and, if the latter, for how long it should continue.
• If a garden leave clause is also used, consider how it might affect the reasonableness of the restriction sought.
• Express each restriction separately so that if any element is unenforceable it does not render the whole clause useless.
• Consider whether a right to pay in lieu of notice is required and, if so, insert a suitable clause.
• If there is no pay in lieu clause, ensure that the employee is dismissed only by giving proper contractual notice.