Ten Top Tips – Restrictive Covenants: Enforcing Garden Leave and Non-Competition Provisions

1. Remind departing employees of their restrictive covenants. Settlement agreements can be a useful mechanism to re-state post-termination restrictions and improve on them if necessary or desirable.

2. It is important to include an express garden leave provision in an employment contract. A well drafted provision can help to keep an employee out of the market long enough to protect your confidential information and goodwill. It can also enable the employee’s successor to build up a relationship with customers/clients without undue interference from the employee serving out his period of gardening leave.

3. A general garden leave provision may not provide adequate protection. The employee’s positive and negative obligations should be clearly specified, such as: to stay away from the office, to return company equipment and confidential information, not to take up any other employment and to inform the employer of any contract with the new employer and most importantly not to communicate with any customers/key suppliers or colleagues.

4. Many employees are connected to customers/ suppliers and colleagues via social media (such as LinkedIn). This can make such restrictions difficult to police. You could consider including a social media clause requiring employees to remove customer/supplier contacts from their personal accounts having to pass on those details to you at the start of a period of garden leave.

5. If you believe an employee is threatening to breach their restrictive covenants, consider suspending the employee on full pay to investigate the matter fully. Check that the employment contract includes a right to suspend, otherwise the employee may argue breach of contract, which if successful, will make the restrictive covenants unenforceable.

6. Consider using forensic IT investigators. If carrying out your own investigations into the employee’s activities on your internal systems, make a copy of the employee’s system and search the copy. Searching directly through the system may change the characteristics of the documents and taint the evidence.

7. Gather as much evidence of wrongdoing as exists (such as misuse of confidential information) as soon as possible to put your best case and best threats forward at an early stage, to make the employee and/or new employer think twice about breaching your restrictive covenants.

8. When making an application for injunctive relief, time is of the essence. An employer will need to be able to show the court that they have a legitimate business interest to protect (such as preservation of confidential information or client/supplier corrections) and that an injunction is the only way to protect it. The longer an employer takes to act, the less likely the courts will be to grant an injunction.

9. Has the employee been taking more than preparatory steps to compete with the business?  In particular, if they are a fiduciary (even if not a statutory director) have they allowed a conflict of interest to arise or made a secret (personal) profit? Where you can evidence they have crossed the line (perhaps by diverting an order or starting to trade) before termination of employment and have gained an unfair competitive advantage by doing so, consider an application for springboard injunctive relief. This will help to protect your business by restricting the employee’s activities for a period, even where there are no express covenants or the restrictive covenants are found to be unenforceable.

10. If the circumstances allow, seek to avoid commencing formal litigation to avoid the time, expense and risk of your restrictions being tested in court by finding a commercial compromise with the former employee/their new employer which still protects your business.