Post-termination restrictions on competition
Post-termination restrictions on competition

The following Employment guidance note provides comprehensive and up to date legal information covering:

  • Post-termination restrictions on competition
  • The need for post-termination restrictions
  • Restrictions on competition—non-compete clauses
  • Non-solicitation/non-dealing clauses
  • Non-poaching restrictions

This Practice Note examines the various types of post-termination restrictions (restrictive covenants) that are typically found in contracts of employment.

The need for post-termination restrictions

During the course of employment, and even during any period of garden leave immediately prior to the termination of employment (see Practice Note: Garden leave and the right to work), an employee will be under various implied obligations to their employer. These duties will include:

  1. the duty of fidelity, including an obligation not to compete (see Practice Note: The duty of fidelity and fiduciary duties), and

  2. an obligation not to misuse confidential information (see Practice Note: Confidential information in employment)

The employee will, as a result of these implied duties, be severely restricted in any activities that may be seen as competing with their employer. Whether an employee’s activities are in competition with the employer is determined by whether:

  1. they supply goods or services which are similar or sufficiently comparable (or there is a realistic prospect of them doing so)

  2. they operate in the same area, and

  3. the scope of the businesses is the same, or the provision of goods or services provided by one is within the scope of the other’s business plan

If there is interchangeability of products within the same area, it is very likely that competition will be established but interchangeability of products