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Departing Employees – Protecting Your Business Part 2

by Laura Graham, Senior Associate in the employment law team at Reddy Charlton Solicitors

In Part 1, we looked at:-

  • the key principles that apply to post termination restrictions, and
  • the circumstances the courts will look at in assessing the enforceability of a post termination restriction.

A “one size fits all” approach to restrictive covenants is not advisable. Carefully drafted and bespoke post termination restrictions are essential for senior employees who have the capacity to harm your business should they leave.

This article focuses on the specific types of post termination restrictions that may be included in a contract of employment under the following four headings:-

  • Non-compete
  • Non-solicitation
  • Non-dealing
  • Restrictions on poaching staff

1 Non-compete clauses
Non-competition restrictions are traditionally more difficult to enforce than other forms of post termination restrictions. A non-compete clause essentially seeks to prevent a former employee from joining a rival employer for a defined period of time after termination.

Non-compete clauses can be considered an unlawful restraint of trade. Rather than immediately include a non-compete provision in a contract of employment, employers should consider if there are other forms of protection which they can use to achieve their objective, such as confidentiality provisions or non-solicitation provisions. If the other methods considered are ineffective in safeguarding the employer’s interest, a carefully crafted non-compete clause should be included in the contract.

2 Non-Solicitation
Non-solicitation clauses usually restrict a former employee making the initial approach to a customer or client of a former employer’s business, with a view to obtaining their business. Generally, the restriction should be limited to customers or clients with whom the employee had contact during a specific period prior to termination.

In assessing the length of time the restriction should be imposed, employers should consider how long it is likely to take before the former employee’s successor will have developed a relationship with the customers or clients of the business.

3 Non-Dealing with Covenant
A non-dealing with covenant restricts the provision of goods or supply services to clients or customers of the business post termination. Such a clause covers a situation where no active steps are taken by the departing employee to provide goods or to supply services to a customer/client and includes circumstances where the customer approaches the ex-employee.

A non-dealing with covenant has clear advantages for an employer as it avoids the practical difficulty of the employer having to prove solicitation. However, a non-dealing with covenant not only restricts a former employee but also clients and customers which is why the courts are more likely to be cautious in upholding such a clause.

4 Restrictions on Poaching Staff
Generally employers have a legitimate interest in protecting the stability of its workforce. However prior to imposing a restriction on poaching staff, the employer needs to consider the minimum required to achieve that aim. For example, the employer should consider the expertise and seniority that it wishes to protect and the length of time that the outgoing employee is likely to have influence over those employees.

About the author
Laura is a Senior Associate in the employment law team in Reddy Charlton Solicitors. As an employment law specialist, Laura has significant experience in assisting employers and employees on the full range of legal issues that may arise during the employment relationship.
As well as providing advice on day-to-day issues such as employment contracts, managing grievance and disciplinary issues, workplace leave, restrictive covenants and reorganisations, Laura also has strong experience in advising on transfer of undertaking situations, and contentious employment disputes before the Workplace Relations Commission and the Irish Courts.
Working closely with the commercial team, Laura is attuned to the importance of seeking a balance between the commercial needs of business and the management of a business’ most valuable resource, employees.
As the firm’s risk management manager, Laura recognises the importance of having robust policies and procedures in place and has strong experience in drafting policies and procedures, handbooks and contractual documents.
Laura is a member of the Employment Law Association of Ireland and is a Registered Trade Mark Attorney.

Categories: Legal

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