This article follows on from Part 1. You should ensure that where possible, when an employee leaves your business, there are suitable and valid restrictions on what the employee can do after departure. Therefore it is important to include suitable restrictive covenants in his employment contract which include the following:
1. Customer non-solicitation restrictions – This restricts the ex-employee from soliciting customers for a defined period. Generally, the covenant should be restricted to customers with whom the employee had contact during a specified period before termination. However, a non-solicitation restriction of this type need not always be limited to customers with whom the individual had direct contact. In certain circumstances it can include those of whom the employee was aware;
2. Potential customer non-solicitation restrictions - This restricts the ex-employee from soliciting potential customers for a defined period. A clause which attempts to extend the restriction to potential customers will be harder to enforce. In general, such protection would only be appropriate where a business can show that building up a relationship with its potential customers was a long and difficult process, involving significant investment in time and money. Nevertheless, it ought in principle to be possible to protect an interest in genuine prospective customers if they are sufficiently defined.
3. Customer non-dealing restrictions - This restricts the ex-employee from dealing with customers with whom he had contact prior to departure for a defined period. It is important to note that a non-dealing covenant will not be enforceable if it prevents any contact with the relevant business contacts. The restriction must be focused on contact that would affect the employer's business;
4. Supplier non-solicitation and non-dealing restrictions - This restricts the ex-employee from soliciting and/ or dealing with suppliers or potential suppliers with whom he had contact prior to departure for a defined period;
5. Employee non-solicitation restrictions – This restricts the ex-employee from soliciting other employees of the company for a defined period. The principle that preventing a former employee from soliciting other employees, may protect the employer's legitimate interest in the stability of its workforce, is generally well accepted. Any clause that seeks to prohibit the poaching of employees will need to consider how long it will be before the outgoing employee's influence over other employees will be eliminated and replaced, and the scope of the classes of employees over whom such influence will exist.
6. Non-competition covenants - Employees are restricted by implied covenants from disclosing confidential information amounting to a trade secret after termination of their employment contract. In addition the employee can be made subject to express confidentiality provisions. Therefore any additional restrictive covenant may be construed as unnecessary. Consequently non-competition restrictions are traditionally harder to enforce than non-solicitation restrictions. However, a non-competition restriction is likely to be enforced in certain circumstances such as: (a) it may not be possible to sufficiently protect a trade secret through implied and express confidentiality terms. Therefore a restriction against carrying out the activity might more realistic; (b) the individual's influence over customers or suppliers may be so great that the only effective protection is to ensure they are not engaged in a competing business in any way.
The restriction must be for a limited time and when deciding the appropriate period, it will be necessary to consider how long it will be before competitive activities by the individual represent less than a material threat to the employer's legitimate interest.
The restriction must be restricted to a defined geographical area. Worldwide covenants have been held to be unenforceable. Relevant factors in determining the geographical restriction will include: (i) whether there is an actual relationship between the interest to be protected and any specific geographical area; (ii) the area of activities of the employee; (iii) the size and nature of the population of the area.
