Properly drafted post-termination restrictions are crucial to ensure that a business is protected when key personnel exit.

From our experience advising clients on protecting their business, here are our top tips when it comes to drafting and enforcing restrictive covenants:

1. Consider whether restrictions are necessary

Post-termination restrictions are essentially a restraint on trade. The courts are reluctant to enforce them unless they are necessary to protect the legitimate business interests of the company seeking to enforce them. Companies should therefore consider whether it is necessary to include post termination restrictions in each individual contract, rather than include them as standard.

2. Consider what types of restrictions are necessary

Employers should also consider what restrictions are necessary to protect the company’s legitimate business interests. The most common types of restrictions which we tend to see in contracts of employment are:

• Non-compete restrictions;
• Non-solicitation/dealing with clients/customers; and
• Non-solicitation/employing of employees.

Such restrictions should be limited to circumstances where the employee is acting in competition with the company seeking to enforce the restrictions, in order to increase the likelihood of them being enforceable.

3. Ensure restrictions last no longer than is necessary

The courts are reluctant to enforce restrictive covenants if they last for any longer than necessary for the company to protect their legitimate business interests. This is typically three or six months post termination, although 12-month post-termination restrictions have been held to be enforceable for senior employees. The UK Government confirmed in 2023 that it intended to reduce the maximum duration of a non-compete restriction that is stopping an employee from joining or setting up a competing business to three months following termination. However, this change has not materialised, and it is unclear if it will now in light of the upcoming general election. The Labour party has not made any pledges in respect of limiting non-compete restrictions.

4. Consider updates following promotions

When an employee is promoted into a more senior role, consideration should be given as to whether the employee should also be asked to enter into new restrictive covenants upon their promotion to ensure that the business is adequately protected.

5. Repeat restrictive covenants in settlement agreements

Where an employer and employee enter into a settlement agreement, the terms of the settlement agreement effectively supersede the terms of the contract of employment unless otherwise specified. Care should therefore be taken when drafting a settlement agreement to ensure that it expressly refers to the terms within the contract of employment which should continue to apply following the termination date (e.g. restrictive covenants, intellectual property and confidentiality).

6. Address suspected breaches quickly

When the employer/employee relationship is at an end, whether or not a settlement agreement has been entered into, if a breach of restrictive covenants is suspected it is crucial that employers investigate the circumstances immediately so that any action can be prepared as quickly as possible. In the event of court proceedings being raised, a judge may take into account any undue delay in applying for an interim interdict order (see below). Put simply, it is more difficult for an employer to make a case for an order if the employer delayed in investigating the breach and in seeking protection.

As well as gathering evidence of the breach or anticipated breach, a key issue to consider at an early stage is whether, at that point, the post-termination restrictions remain enforceable. As well as considering the scope of post-termination restrictions at the point of drafting them, employers need to reconsider them at the point of potential breach. The courts will only uphold a restriction where it goes no further than necessary to protect the employer’s legitimate business interests, and the scope of what might be considered “necessary” can of course evolve during the period of employment.

7. Issue a cease and desist letter

If a breach has occurred or is anticipated, the first step is to issue a letter to the former employee putting them on notice that they are considered to be in breach of their post-termination restrictions; and should they fail to cease the conduct in question, that court proceedings will be raised against them. This in itself might be enough to stop the harm, but if it is not, a court will want to see that any order sought is necessary i.e. that steps have been taken to resolve the issue before seeking an order.

8. Request undertakings

The former employee can be asked to grant an undertaking that they will observe the contractual restrictions and refrain from any wrongful conduct. This avoids the need for a contested hearing on an interim court application and secures short-term protection without incurring the costs of going to court.

If an undertaking has not been considered prior to a court application, the court may want to know why.

An undertaking can be given in correspondence between solicitors, or where there are live court proceedings, to the court.  An undertaking to the court means that a breach of it is liable to be a contempt of court.

9. Initiate court proceedings for an interim interdict

In Scotland, an order provisionally preventing an opposing party from doing something is known as an “interim interdict”.

An interim interdict can be sought in respect of (1) a wrong that has been committed; or (2) an anticipated wrong. It can be sought as a stand-alone court action, or as part of a wider action e.g. for damages.

Interim interdict is granted at the pursuer’s risk. Therefore, if the pursuer fails to achieve a permanent (perpetual) interdict against their opponent at the end of the action, then the opponent may be able to claim damages for any loss or damage sustained by the defender by reason of the order. This could include loss of profit during the period that the interim interdict preventing them from doing something was in place. Damages for wrongful interdict can therefore be substantial.

To obtain an interim interdict, the pursuer must establish that:

• they have a prima facie case against the alleged wrongdoer;
• they must show that, assuming the facts they state can be proven, the remedy is justified;
• the balance of convenience favours the grant of the interim interdict.

When seeking to enforce a restrictive covenant, this will involve establishing the former employer has a legitimate interest and that the protection sought is no more than is reasonable having regard to the scope and duration of the restrictions and presenting evidence of a breach or an intention to breach the restrictions, and the harm that may be done to the former employer if the interim interdict is not granted.

An employer seeking an interim interdict must show that the court refusing the order would do more harm to them than granting it would do to the opponent.

The court has discretion when assessing the balance of convenience and there are many factors that it may take into account.  In proceedings involving covenants, factors that the courts have found to be important include whether there has been undue delay in applying for the order, the likely harm to the employer’s business if the order were refused and the conduct took place, and the financial hardship for the defender if interdict were granted.

10. If necessary, take action for breach of interdict

If a defender fails to comply with an interdict order (interim or perpetual) an employer can bring court proceedings in respect of the breach. A breach of interdict is a quasi-criminal matter as it consists of the defender disobeying a court order.

There are two important points which are relevant to breach of interdict:

• (1) an interdict must have been pronounced by the court and intimated to the defender.
• (2) the conduct complained of must amount to a breach of the terms of the interdict.

When considering a breach, the standard of proof to be met is “beyond reasonable doubt”.

Failure to comply with an interdict order will be treated as a strong indication of breach, but accidental breach is not enough. The defender must wilfully have breached the interdict. Breach of interdict is contempt of court. The court has some discretion as to the penalty to be imposed. This could be a fine, imprisonment, or both.

11. Consider a claim for damages

If an employer has sustained loss as a result of a former employee’s breach of their restrictive covenants, then a claim for damages might be considered – as an alternative, or in addition, to the interdict.

If the new employer induced the breach of contract, it may also be possible to sue the new employer.

Ensure your business is protected. Reach out to us now for expert guidance on drafting and enforcing restrictive covenants. Safeguard your interests and stay ahead of potential risks.

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