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Non-Compete Clauses in Employment Contracts
It is often only when issues arise, or at the termination of an employment, that an employee will review the more restrictive clauses in their contract of employment with a critical eye. The restrictions on competition, amongst others, are often passed over in the pressure of the interview process and the desire to secure a favourable position. However, once the dust has settled, and the need for onward employment within an industry or locality is considered, many employees regret not having sought to adapt or strike-out onerous non-compete clauses from their contracts.
Whilst the courts will look critically at the scope of any restriction, the length of enforcement and the geographical area covered, simply taking an action against a former employer in order to have such a review is often beyond the means or patience of an employee seeking to move on. As you would anticipate, the general rule for such clauses is that a more limited scope is more likely to withstand a legal challenge than an obviously unreasonable and protracted set of restrictions. An employer will need to be able to justify the length and range of their restrictions with specific professional and economic rationale if they would seek to withstand a challenge in the courts.
A further element for consideration by employers is introduced in the case of non-UK workers, who may be entitled to compensation under local laws, even when the head office of the employer is in the UK. Many countries require non-compete undertakings to be compensated, often at high rates and paid upfront. Such additional penalties may need to be carefully considered before the application of these restrictions in employee contracts, particularly with an international element.
For further advice on employment law issues, please contact Lucy Thomas at our Cockfosters office.