Enforcing Restrictive Covenants

Employment contracts often contain provisions that restrict activities after employment has finished. These restrictions are known as post termination restrictive covenants. Further information may be found here: Restrictions in employment contracts.

If you believe a former employee is preparing to compete, or is competing, in breach of their restrictions, then it is important to review the situation and consider whether to take further action.

As a preliminary step, you should consider whether the restrictive covenants are likely to be enforceable. Next, you should investigate what has happened and what damage has been done to your business.

This might include reviewing your IT system, to establish the information has been accessed, downloaded, or printed.  It might also be useful to review telephone records, to see if unexpected calls have been made with suppliers or customers.

If you take the decision to proceed with a legal claim, then the first step is normally to write a ‘cease and desist’ letter to the former employee.  This letter:

• outlines the restrictive covenants that bind the former employee, which you believe have been broken.
• outlines, or exhibits, the relevant evidence, which was gathered during your investigation.
• demands undertakings, which might include reaffirming contractual obligations.
• makes it clear that if the former employee does not comply with your demands, further action will be taken in the civil courts.

A well worded cease and desist letter might be sufficient to resolve the situation.  However, if it does not, there are a number of avenues that might be appropriate.  These include:

• an application for an injunction. This is a Court Order that your former employee does not do something.  For example, contact your customers, or use your confidential information.  Injunctions are interim (temporary), or permanent.
• a claim for damages. This is a Court Order that your former employee pays you money, to compensate for their breach of contract.
• a claim for account of profits. This is a Court Order that your former employee pays you the profits they have made, from their breach of contract.
• a claim against a third party, such as your former employee’s business partner.

If you believe a former employee is competing, then it is important to take legal advice sooner rather than later.  This is because an application for an interim injunction might be refused, because of delay.