Are Restrictive Covenants too harsh?

Would removing non-compete clauses improve worker’s rights? Theoretically, they’re supposed to be in place for C-suite level employees to prevent them taking business secrets to competitors. So, is it necessary to make low-level workers sign non-competes too? Is it too harsh?

In the UK, all non-compete clauses in contracts of employment are void until a court says that they are necessary to protect a legitimate business interest. This means that where an employee disagrees that they are bound by a non-compete or other restriction in their contract of employment, the employer will have to take legal action to enforce the benefit of the clause that they seek to rely upon.

All too often employers will have the same blanket non-compete clause from the cleaner to the Chief Executive and won’t necessarily have applied their mind to what they actually need. But is that fair? And does it offer the employer the protection that they need?

Arguably, it creates the wrong culture in a business, and it won’t offer the protection that the employer actually needs in the event of a valuable employee leaving. This is because the employer won’t necessarily be able to show that they have applied their mind to what they need in the form of protection from unfair competition by a particular member of staff / role. It might be necessary for someone at a lower level to have a non-compete, but is it necessary for them to have a non-compete that is as restrictive as the one that the Chief Executive has? Unlikely in all honesty and having the same level of restriction for the lower-level employee and the Chief Executive is definitely going to be unenforceable against the lower-level worker and might make the Chief Executive restriction unenforceable too.

The enforcement of restrictive covenants is judged narrowly, and a restriction needs to go no further than absolutely necessary to protect an employer’s business. Asking for something more will make the restriction unenforceable.

So, if you need non-compete or other restrictions in your contracts of employment, think about who you need them for, and why, and draft them accordingly – making sure you differentiate between those lower-level and C-suite employees. Then make sure that the restrictions are put in writing, shared with the employee and signed by them! And don’t forget to update restrictions as an employee climbs the corporate ladder, making sure you think about what you need and why at each stage, and updating the contract accordingly – and of course, getting it signed!