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Halt on proposed legislation

Halt on proposed legislation
April 16, 2018 Steve Nixon

In 2016, there was a proposal for the Government to legislate on the law relating to restrictive covenants in employment contracts. In February 2018, the Government published its findings.

A restrictive covenant, for the purposes of employment law restricts the way in which a party can act. Mainly, restrictions are used to record what the employee cannot do after the termination of their employment and are designed to protect the employer’s business.

The Government was concerned that restrictions were stifling innovation and were restricting the flexibility within the labour market. However, following a call for evidence, the Government has confirmed that there is not (at least for now) a need for legislative intervention stating that “restrictive covenants are a valuable and necessary tool for employers to use to protect their business interests and do not unfairly impact on an individual’s ability to find other work. Common law has developed in this area for over a century and is generally acknowledged to work well.”

Providing that well-drafted covenants are included in a contract of employment, the court will always balance the interests of the employer and employee. The key is to ensure that covenants are well-drafted so that they record the intention of the parties concisely. The covenant should be no wider than is reasonably necessary in order to protect the employer’s legitimate interests.

There are a number of options available to businesses to enforce those covenants and to protect the company’s legitimate interests.

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