One of our managers has recently handed in his notice and we have subsequently been made aware that he has accepted a job in a competing business. We have also heard a rumour that he has approached another member of his team in an effort to persuade her to also join the other business. Is there anything we can do to prevent the manager from taking up a role in the other business and to stop him poaching other members of staff?

Employees play a key part in the success of all businesses and in some cases the loss of a key employee to a competitor may result in significant damage to a business. It can be frustrating when departing employees join a competitive business, bringing with them their knowledge of confidential and sensitive company information. It can also be a cause of concern for employers particularly if the employee in question is a senior member of staff who has influence over clients, customers and/or fellow colleagues, which may be the case here.

In the first instance, it will be necessary to review the employee’s contract of employment to check whether there are effective post-termination restrictions (or restrictive covenants) in place. If there are no such clauses in the contract, then there is little the employer can do to prevent the employee from engaging in competitive activities. A post-termination restriction is a clause in an employment contract which seeks to prevent a former employee from engaging in certain activities after the employment relationship has ended for a certain period. Post-termination restrictions are designed to protect the employer and typically include the following:

Non-compete clause: This is intended to prevent a former employee from engaging in competitive activities e.g., carrying out similar work for a competitor. The activity of a former employee may be restrained where the business is in direct competition, or indirectly competitive (which may be more difficult to enforce).

Non-solicitation clause: This seeks to prevent a former employee from contacting a relevant client, customer or supplier with a view to persuading them to do business with the employee.

Non-dealing clause: This restriction seeks to prevent a former employee from having any dealings with a relevant client, customer or supplier, irrespective of who contacted whom and how that business came about.

Non-poaching clause: This is intended to prevent the former employee from employing, engaging or persuading certain colleagues to join a competing business.

Enforcing Post Termination Restrictions

The presumption is that post-termination restrictions are void and unenforceable, but they may in certain circumstances be justified if the purpose of the restriction is legitimate and if the restriction goes no further than is necessary to protect a legitimate interest and is, in all the circumstances, fair and reasonable. An employer must demonstrate that it has a legitimate business interest to protect and that the restriction is no wider than is reasonably necessary to protect that legitimate interest. The restrictions must be reasonable in relation to the geographical scope, the duration and the activities which are restricted.

It is important that an employer takes the aforementioned factors into consideration and ensures that any post-termination clauses are appropriately drafted as a failure to do so will likely mean that they will not be upheld by a court. For a restrictive covenant to be enforceable it must not be drafted too widely and if a challenge is brought it will be for the employer to show that the clause is justified and sufficiently narrow. Restrictive covenants therefore must be relative to the employee’s position within the business e.g., restrictions placed upon senior employees which are more onerous may be justified given the employee’s access to sensitive company information. Post-termination restrictions need to be tailored and carefully considered for each individual role as including the same clause in every contract as a blanket provision risks the clause becoming unenforceable.

In Ryanair DAC v Peter Bellew [2019] IEHC 907, the High Court considered the enforceability of a restrictive covenant which sought to prevent Mr Bellew from working for a period of 12 months after the termination of his employment, directly or indirectly, in any capacity for any business that was wholly or partly in competition with Ryanair. While the High Court accepted that Ryanair had a legitimate interest in protecting the valuable sensitive and confidential commercial, operational and financial information that had come within Mr Bellew’s knowledge, in the course of his employment, the court found that the restrictive covenant was drafted too broadly and went beyond the legitimate interests of Ryanair. The court took the view that Ryanair could not justify preventing Mr Bellew from taking up employment in any capacity in any airline. In light of this decision, it is important for employers to consider the legitimate business interests that require protection and to ensure that any post-termination restrictions are drafted no wider than necessary to protect those interests.

In the above scenario if it is the case that the employee’s contract contains appropriately drafted post-termination restrictions, the employer may decide to write to him and point out the content of the relevant clauses of his contract and call upon him to confirm in writing that he will not take any steps to breach the relevant restrictions in default of which the employer will take immediate legal action.

In order to enforce a post-termination restriction, the employer may consider taking legal action if there is a real risk of serious commercial damage. The most common remedy sought is an injunction but if such a step were to be taken the employer would need to act swiftly since any material delay may defeat an application for an injunction. Alternatively, the employer may sue the former employee for breach of contract. In any court action, there is the risk of significant legal costs.

Conclusion

Employers may use post-termination restrictions as a tool to limit the adverse effect of employees leaving so long as they serve to protect legitimate business interests and are used fairly and appropriately. The enforceability of post-termination restrictions will depend heavily on the circumstances. It is vital that employers ensure that the correct protections are in place at the beginning of the employment relationship and that such restrictions are regularly reviewed and updated to ensure they remain enforceable.