why are Restrictive Covenants important?
All businesses are subject to some level of employee churn and it is hugely important to ensure your business is protected following the departure of key members of staff, and restrictive covenants can be an excellent way to achieve this.
You may have invested many years of hard work to make your business a success, including cultivating a network of suppliers and customers. As you expand, it is inevitable that some of your responsibilities will need to be delegated to your staff, e.g. sales people and account managers.
The aim of a restrictive covenant is to ensure you will not lose your clients if an important member of your team leaves. This is particularly vital if they are intending to take up a position with a rival company, as this could potentially cause immediate and severe damage to your business.
We can help you draw up a robust contract of employment that will help give you peace of mind that your business has as much protection as the law allows against attempts by a former employee to damage its interests e.g. by stealing clients, undercutting prices etc.
All staff with access to sensitive business information, from sales people through to invoice clerks, should be required to enter into restrictive covenants which impose restrictions on their activities in the months following their departure from your business. Such restrictions may include preventing them from contacting your clients (known by lawyers as ‘non-solicitation’), from dealing with your clients (even where the clients contact them) and even from working in a competing business.
However, these contractual obligations must be drawn up with the utmost care and tailored to each individual case to ensure maximum protection. If this is not done correctly, it is likely to be ruled invalid by the Court and you will lose the intended protection.
Restrictive Covenants advice from Ralli
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