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The government has just issued a consultation paper about contractual clauses which restrict the activities of your employees once they leave your employment.

The main area that they are looking at are clauses which stop an employee going to a competitor for a period of time after their employment has ended. One of the suggested outcomes is that if you prevent someone from working for a competitor after they leave you, you will have to pay them a proportion of their salary during the period that they are prevented from working for a competitor.

They also wish to look at whether other clauses which stop your employees approaching your current clients on behalf of another employer, poach staff from you, or provide similar services to your current clients on behalf of a new company.

These contractual clauses are often included in documents which are known as “restrictive covenants”. We often draft such documents for our clients to help protect their business once an employee leaves. From our experience, stopping somebody working for a competitor is only of marginal use. However, what our clients do find important is that an employee does not use their knowledge of your client base and your current staff, against you when working for a competitor.

This means clauses relating to non-solicitation, non-dealing, and non-poaching, may be included in the new legislation that the government is considering and that could have a serious effect on many of our clients.

We would welcome your views on these proposals to see if there is some commonality of interest from our companies, and we will be happy to put a response to the government on these proposals. We will be writing further blogs on this issue in the future, so keep an eye out.

If you’d like to find out more, the proposals can be found here.