A restrictive covenant is an express (explicitly stated) term in a contract of employment restraining the employee from certain activities following employment.
- The object of the restrictive covenant is to protect the employer from competition brought about by the employee’s departure, which may be in the form of restraining the former employee’s ability to deal with clients or customers or from making use of clearly defined categories of confidential information or trade secrets.
- In order to protect an employer's commercial interests, it is often commercially desirable to impose certain restrictions on an employee which will apply following the termination of the employment relationship.
- Employees may have knowledge of sensitive information in relation to their employer's business strategy, customer and/or supplier profile and pricing which they could use post-termination for their own benefit or for the benefit of a competitor.
- Accordingly, employment contracts will often contain specific restrictions to protect the employer's business interests post-termination.
In May 2023, the government published its response to consultation which closed in February 2021 on "Measures to reform post-termination non-compete clauses in contracts of employment".
In a move to boost flexibility and dynamism into the UK labour market, the government has committed to introducing a new law to limit the length of non-compete clauses to three months (there are currently no laws relating to restriction/enforceability), when parliamentary time allows.