After the Handshake: What Happens to Restrictive Covenants When an Employee Walks Away

When a valued employee hands in their notice, most employers experience a familiar mix of emotions: disappointment, perhaps some irritation, and — if the departing individual is heading to a competitor — a quiet flicker of alarm. What happens to the clients they managed? The suppliers they know? The pricing strategy they helped build?

The answer, more often than not, lies in a short paragraph buried towards the end of the employment contract. Restrictive covenants are among the most litigated clauses in English commercial law, and yet they remain among the most poorly understood — by the businesses that rely on them and the employees who sign them.

The Starting Point: Restraint of Trade

English courts begin from a presumption that restrains on trade are void. An individual is entitled to earn a living, and a clause that prevents them from doing so merely to shield an employer from competition will not survive scrutiny.

Covenants escape this fate only if the employer can show two things: that it has a legitimate business interest worthy of protection, and that the restriction goes no further than is reasonably necessary to protect it. Legitimate interests typically include trade connections (client relationships and goodwill) and confidential information. A general desire to avoid competition, however, is not a legitimate interest — a point employers frequently overlook when drafting.

What Employers Can Realistically Enforce

The most common covenants fall into four broad families, each with its own tolerance for scrutiny:

Non-compete clauses prevent a former employee from working for a rival or setting up in competition. These are the hardest to enforce. Courts ask whether the employer genuinely needed to remove the individual from the market altogether, or whether a narrower covenant would have sufficed. A six-month blanket ban on working 'in the industry' for a junior account manager will rarely stand; a targeted bar on joining a named competitor in a similar role, for a defined period, stands a better chance.

Non-solicitation clauses prohibit poaching the employer's clients or customers. These are generally more palatable, particularly where the employee had genuine relationships with those clients. But the drafting matters: a clause restricting contact with 'any client of the Company' may fail where the employee only dealt with a handful of accounts.

Non-dealing clauses go slightly further, preventing the former employee from doing business with former clients even where the client approached them first. Courts accept these in some circumstances, but they tread a fine line.

Non-poaching (or non-enticement) clauses protect the workforce itself, stopping departing staff from recruiting former colleagues. Again, scope and duration are decisive.

Garden Leave: A Different Kind of Restraint

Not all protection happens after employment ends. Garden leave allows an employer to keep an employee on full pay but away from the business — excluded from premises, systems and client contact — for the duration of their notice period. It is often the most practical tool of all: the employee remains bound by duties of confidentiality and fidelity throughout, and the 'danger window' shrinks before any covenant is even tested.

Garden leave must be provided for in the contract, however, and the notice period must be long enough to be useful. Employers who discover mid-departure that their contracts contain no garden leave provision, and only a fortnight's notice, have few options left.

Why Covenants Collapse

In our experience, restrictive covenants fail for reasons that were fixed into the document long before any dispute arose:

• Duration. Twelve months is at the outer limit of what courts will readily accept for most roles; anything longer demands strong justification.
• Geography. A nationwide restriction for an employee who served clients in Leeds and Manchester invites the objection that it is wider than necessary.
• Blanket scope. Clauses that capture every employee, client or product line, rather than those the individual actually dealt with, are vulnerable.
• No consideration. Covenants introduced after the employment began, without fresh consideration (a promotion, a pay rise, or a new contract), may be unenforceable entirely.

There is also a subtler trap: courts will not blue-pencil a covenant into shape. Historically, if any part of a restriction was unreasonable, the whole clause could fall. While the modern approach allows reasonable severance of discrete parts in some cases, employers should not assume a court will rescue sloppy drafting.

What Departing Employees Should Understand

Employees often assume covenants are unenforceable bluster. That is a mistake. Well-drafted covenants are enforced in England and Wales, frequently at speed and sometimes by injunction — an outcome that can freeze a new role before it begins.

Equally, employees should not assume every clause binds them. A restriction that is excessive in duration, geography or scope may be resisted, and employers know that issuing proceedings exposes them to scrutiny of their own drafting. Practical steps for a departing employee include reviewing the contract carefully, avoiding solicitation of clients or colleagues during the notice period, and being candid about the new role if asked.

A Word on Remedies

When employers do enforce, they typically seek an interim injunction to restrain breach pending trial, supported by undertakings and, in serious cases, damages. The burden is high — the employer must show a serious question to be tried, that damages would be inadequate, and that the balance of convenience favours intervention. Even so, the threat of injunction proceedings is often enough to resolve matters, which is why early legal advice on both sides pays for itself.

Getting the Balance Right

Restrictive covenants occupy a narrow corridor between legitimate protection and unlawful restraint. Employers should review covenants when roles change, tailor restrictions to the individual, and consider garden leave as a first line of defence. Employees leaving a role should read the small print before signing anything new.

Whether you are protecting a business you have spent years building, or moving your career to pastures new, the few hundred words in that clause can shape what you may do for the next twelve months. It is worth understanding them before the handshake at the door.

This article is for general information only and does not constitute legal advice. For tailored guidance on restrictive covenants, employment contracts or disputes, please contact Bentley Law to arrange a consultation.