However great the working conditions and staff incentives on offer, all businesses experience some level of staff turnover from time to time. That is why it is important to ensure your business is protected in the event of the sudden departure of key members of staff. Restrictive covenants, if properly drafted, go some way to help your business protect its commercial interests.
Why are Restrictive Covenants important?
You will have invested years of hard work in growing your business – cultivating a network of suppliers, introducers and customers. As you expand, it is inevitable that at some point, these activities are delegated to key staff such as sales and account managers. The problem is that all business relationships are quite personal in nature: people buy from people they know, like and trust. So, if a sales representative or an account manager leaves to work for a competitor, then unless you have taken steps to protect the business, there is a high risk that key suppliers, introducers or customers will follow.
Drawing up a robust contract of employment will help give you peace of mind that your business has as much protection as the law allows. Standard templates downloaded from the internet will not achieve this goal because, where restrictive covenants are concerned, one size definitely does not fit all.
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. Depending upon the nature of their role within the business, covenants may restrict an ex-employee’s ability to compete generally, otherwise deal with customers, suppliers etc or simply prevent them from contacting such customers with a view to supplying goods and services from a competing business.
Restrictions are always interpreted by the Court very strictly against the party seeking to enforce them and so they must be crafted very carefully taking into account a number of factual considerations. ‘Standard’ restrictions are unlikely to withstand the scrutiny of the Court and will therefore be ineffective, leaving you with nothing other than a significant legal bill.
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