Employment Law – Restrictive Covenants

What is a Restrictive Covenant?

A restrictive covenant is a contractual term that seeks to restrict certain activities by an employee after their employment has ended.

Restrictive covenants are commonly included in:

• Employment contracts
• Directors' service agreements
• Settlement agreements
• Shareholder agreements

They are particularly common for employees who:

• Hold senior positions
• Have close relationships with clients
• Have access to confidential information
• Have knowledge of commercially sensitive business information
• Manage important teams
• Have significant influence over customers or suppliers

When an employee leaves to join a competitor or establish their own competing business, the former employer may be concerned that information, relationships or influence acquired during employment could be used to its disadvantage.

Restrictive covenants are therefore intended to protect legitimate business interests rather than simply prevent ordinary competition.

What Are the Main Types of Restrictive Covenant?

Restrictive covenants commonly fall into several categories.

Non-Competition

A non-competition covenant, often called a non-compete clause, seeks to prevent you from:

• Working for a competing business
• Establishing a competing business
• Being involved in certain competing activities

for a specified period after your employment ends.

The restricted period might, for example, be:

• 3 Months
• 6 Months
• 12 Months

There is no general rule that any particular period is automatically enforceable.

A six-month restriction may be reasonable for one employee and excessive for another.

The court will consider whether the particular restriction goes no further than reasonably necessary to protect the employer's legitimate business interests.

Non-Solicitation of Clients or Customers

A non-solicitation clause normally prevents you from actively approaching certain clients or customers of your former employer with a view to obtaining their business.

For example, you may be prohibited from soliciting customers:

• With whom you personally dealt
• For whom you were responsible
• About whom you had significant confidential information

during a specified period before your employment ended.

A properly drafted covenant will normally define which customers are protected rather than attempting to prevent contact with every person or organisation that has ever dealt with the employer.

Non-Dealing

A non-dealing covenant is usually broader than a non-solicitation restriction.

A non-solicitation clause focuses on whether you actively approached the customer.

A non-dealing clause may prevent you from doing business with specified customers even if the customer approaches you first.

Because this can interfere more substantially with your ability to work, the court will examine carefully whether the restriction is reasonably necessary.

A non-dealing covenant is not automatically unenforceable merely because it is broader than a non-solicitation clause.

Its enforceability will depend on matters such as:

• Which customers are covered
• How recently you dealt with them
• Nature of your relationship with them
• Length of the restricted period
• Employer's legitimate interest requiring protection

Non-Poaching of Employees

A non-poaching covenant seeks to prevent you from encouraging important employees of your former employer to leave and join:

• Your New employer
• Your Own business
• Another organisation

These restrictions can be particularly relevant where there is a risk of a coordinated team move.

They are commonly found in sectors where teams have significant commercial value, including financial and professional services.

A well-drafted clause will usually be limited to employees with whom you worked or over whom you had sufficient influence rather than covering every employee in the organisation.

Restrictions Relating to Suppliers

Some restrictive covenants seek to prevent interference with important supplier relationships.

Whether such a restriction is enforceable will again depend on whether there is a legitimate business interest and whether the wording goes no further than reasonably necessary to protect it.

Confidentiality Restrictions

Employment contracts also commonly contain continuing confidentiality obligations.

These may restrict the use or disclosure of matters such as:

• Trade secrets
• Customer information
• Pricing information
• Business plans
• Financial information
• Commercial strategies

Confidentiality obligations are related to restrictive covenants but operate differently.

An employee may continue to owe obligations concerning genuinely confidential information even where a particular non-compete or non-solicitation restriction is unenforceable.

How Enforceable Are Restrictive Covenants?

The starting point under English law is that a contractual restraint of trade is unenforceable unless the employer can justify it.

An employer seeking to enforce a restrictive covenant will generally need to establish that:

• It has a legitimate business interest requiring protection
• The restriction goes no further than reasonably necessary to protect that interest

A covenant cannot lawfully be used simply to stop an employee from competing.

The courts recognise that employees should generally remain free to use their own:

• Skills
• Knowledge
• Experience

after employment ends.

What Legitimate Business Interests Can an Employer Protect?

Recognised interests can include:

• Trade connections with customers
• Confidential information
• Trade secrets
• Stability of the workforce

Depending on the circumstances, important relationships with suppliers or other business contacts may also justify protection.

The employer must establish a genuine interest of its own.

It cannot impose a restriction simply because it would prefer you not to work for a competitor.

How Does the Court Decide Whether a Restriction is Reasonable?

The question is highly fact-specific.

Relevant factors can include:

• Your Seniority
• Your Role
• Your Access to confidential information
• Your Influence over customers
• Your Influence over employees
• Geographical scope of the restriction
• Duration of the restriction
• Activities being prohibited
• Circumstances when the covenant was agreed

A court will normally examine the wording of the particular clause rather than asking whether restrictive covenants generally are reasonable.

Can an Employer Completely Prevent You From Working in Your Industry?

A blanket restriction preventing you from earning a living in your profession or industry is likely to face close scrutiny.

The employer must demonstrate why that level of restriction is reasonably necessary.

For example, a clause preventing a senior employee from working for any business that competes in any way anywhere in the world may be considerably harder to justify than one limited to:

• A Defined business area
• Relevant competitors
• Work similar to the employee's previous responsibilities
• A Reasonable period

The wider the restriction, the more difficult it may be for the employer to demonstrate that it is necessary.

How Wide Can a Customer Restriction Be?

A covenant covering every customer of a large organisation may be too wide where you had no relationship with most of them.

A more focused clause may restrict customers:

• With whom you had material dealings
• For whom you had managerial responsibility
• About whom you obtained confidential information

during a defined period before termination.

For example, limiting the covenant to customers with whom you had material dealings during the final 12 months of employment may be easier to justify than a restriction covering every historical customer.

There is nevertheless no automatic rule that a particular formulation will always be enforceable.

Are Non-Compete Clauses More Difficult to Enforce?

They can be.

A non-compete clause prevents the employee from carrying out competitive work rather than merely restricting interference with specific customers or confidential information.

A court may therefore consider whether the employer's legitimate interest could adequately be protected by less restrictive provisions such as:

• Confidentiality clauses
• Non-solicitation clauses
• Non-dealing clauses
• Non-poaching clauses

If narrower restrictions provide sufficient protection, an additional broad non-compete may be harder to justify.

However, non-compete clauses can still be enforceable where the employer can establish that a narrower restriction would not adequately protect its legitimate interests.

Does Seniority Make a Difference?

Yes.

Restrictive covenants are often easier to justify for employees who:

• Hold senior positions
• Control important client relationships
• Possess strategic confidential information
• Have influence over significant employees
• Have substantial commercial responsibility

However, seniority is not decisive.

A relatively junior employee may still have strong personal relationships with important customers or access to highly sensitive information.

Conversely, a senior job title does not automatically justify broad restrictions if the employee had little relevant exposure.

The court will look at the reality of the role.

Is There Currently a 3-Month Limit on Non-Compete Clauses?

No.

As at 10 September 2026, there is no general statutory rule limiting employment non-compete clauses in Great Britain to three months.

A previous government announced an intention in 2023 to introduce a three-month statutory limit, but that proposal was not implemented.

The government subsequently published a further working paper in 2025 considering possible reforms to non-compete clauses, including:

• Statutory time limits
• A Complete ban
• A Ban below a salary threshold
• Different limits depending on employer size

That exercise closed in February 2026.

No general statutory cap has yet replaced the existing common-law enforceability test.

A three, six or even longer restriction must therefore still be assessed according to whether it is reasonable and necessary to protect a legitimate business interest.

Can My Employer Introduce Restrictive Covenants After I Have Started Work?

Potentially, but an employer cannot normally change contractual terms merely by announcing new restrictions.

Employment contracts are legally binding and normally require agreement before contractual terms are changed.

If your employer wants to introduce new restrictive covenants after employment has started, it should normally:

• Explain the proposed changes
• Consult with you
• Obtain agreement
• Record the new terms clearly

A substantial new restriction can have a significant impact on your future employment opportunities.

You should therefore understand exactly what you are agreeing to.

What if I Do Not Agree to the New Covenants?

An employer might try to proceed in different ways.

Imposing the Change Without Agreement

An employer that simply imposes a material contractual change without agreement may breach the employment contract.

Depending on the seriousness of the change and surrounding circumstances, this could potentially give rise to issues including:

• Breach of contract
• Working under protest
• Constructive dismissal

However, you should not assume that simply continuing to work will always preserve an objection indefinitely.

Whether conduct amounts to acceptance of contractual changes depends on the circumstances, particularly where the change does not have an immediate practical effect.

For further guidance, see Constructive Dismissal.

Dismissal and Re-Engagement

An employer may, as a last resort, terminate the existing contract with proper notice and offer continued employment under new terms containing the proposed restrictions.

This is commonly referred to as dismissal and re-engagement.

The employer should follow the statutory Code of Practice on dismissal and re-engagement where it applies.

This includes:

• Meaningful consultation
• Considering reasonable alternatives
• Treating dismissal and re-engagement as a last resort
• Following a fair procedure

Depending on your qualifying service and circumstances, a dismissal may potentially give rise to an Unfair Dismissal claim.

Is Consideration Required for New Restrictive Covenants?

Where new contractual obligations are introduced during existing employment, the question of consideration can be important.

This means that there should generally be legally sufficient value supporting the new contractual agreement unless another legally effective method, such as execution as a deed, is used.

Examples that may potentially form part of the consideration for accepting new restrictions include:

• A Pay rise
• A Bonus
• A Promotion
• Additional benefits
• Another genuine contractual benefit

Continued employment may potentially be relevant depending on the particular contractual circumstances, but employers should not simply assume that nominal or unclear consideration will always be sufficient.

There is no general legal rule that paying an employee a few hundred pounds automatically makes new restrictive covenants enforceable.

Even where valid consideration exists, the covenant must still satisfy the restraint-of-trade test.

When Else Might a Restrictive Covenant Be Unenforceable?

Several other issues can affect enforceability.

Covenants That Were Too Wide When Originally Agreed

Reasonableness is generally assessed by reference to the circumstances existing when the covenant was entered into.

An employee does not normally grow into an otherwise unreasonable covenant merely because they later become more senior.

For example, suppose an employee joined in a junior role and signed restrictions that were unjustifiably broad for that role.

Years later, the employee becomes a senior director with substantial client influence.

The later promotion does not necessarily cure the problems in the original covenant.

For this reason, employers commonly review restrictive covenants when employees:

• Receive a Promotion
• Take on Greater responsibility
• Begin managing important customers
• Obtain access to more sensitive information

Fresh covenants may then be agreed that reflect the new position.

Covenants Agreed on Promotion

A promotion can provide an appropriate opportunity for an employer to introduce updated restrictions.

The new covenants should still be:

• Clearly agreed
• Appropriate for the new role
• Supported by valid contractual arrangements
• No wider than reasonably necessary

A promotion or associated increase in remuneration may also be relevant to the issue of consideration.

What if I Never Signed My Employment Contract?

The absence of a signature does not automatically make a restrictive covenant unenforceable.

Contracts and contractual changes can sometimes be accepted through conduct.

For example, an employee may work for many years on clearly communicated contractual terms without signing the document.

However, the employer must still establish that the restrictive covenant actually formed part of the contractual agreement.

This can be more difficult where:

• The Terms were never clearly provided
• The Employee expressly rejected them
• The Covenant was introduced after employment started
• There is little evidence of acceptance

The more onerous the restriction, the more important clear evidence of agreement can become.

What if Other Employees Do Not Have the Same Covenants?

An employer's failure to impose identical restrictions on colleagues does not automatically make your covenant unenforceable.

Employees may legitimately have different restrictions because of differences in:

• Duties
• Seniority
• Client exposure
• Access to confidential information
• Commercial influence

However, inconsistency can sometimes be relevant evidence.

For example, if several employees have essentially identical roles and access to exactly the same information but only one is said to present an exceptional competitive risk, the employer may have to explain why.

The core issue remains whether the restriction applying to you protects a legitimate business interest and is reasonable.

What if My Employer Seriously Breached My Contract?

A serious repudiatory breach by an employer can also affect its ability to rely on post-termination restrictive covenants.

Where the employer fundamentally breaches the employment contract and the employee accepts that breach by terminating the relationship, the employer may in some circumstances lose the ability to enforce contractual post-termination restraints.

Whether this principle applies will depend on:

• Nature of the breach
• Contractual wording
• How the employment ended
• Employee's response

This can be particularly important in a potential constructive dismissal situation.

Can a Court Remove Part of an Unreasonable Covenant?

Potentially.

This is commonly referred to as severance or the blue-pencil test.

The Supreme Court considered this issue in Tillman v Egon Zehnder Ltd [2019] UKSC 32.

A court may, in appropriate circumstances, remove offending words from a restrictive covenant while leaving the remaining restriction enforceable.

However, the court will not simply rewrite a badly drafted covenant for the employer.

Broadly, severance requires that:

• The Unenforceable wording can be removed without adding or modifying the remaining words
• The Remaining contractual restrictions continue to make sense
• Removing the wording does not materially change the overall effect of the post-employment restraints

The availability of severance therefore depends heavily on how the covenant has been drafted.

A covenant should not be assumed to be enforceable merely because a court might potentially remove problematic wording.

Practical Advice if You Have Restrictive Covenants

Restrictive covenants should be reviewed before you:

• Resign
• Accept a job with a competitor
• Start your own competing business
• Contact former customers
• Recruit former colleagues

Do not assume that a restriction is unenforceable simply because it appears wide or because someone has told you that employment covenants are "never enforced".

Equally, the fact that a clause appears in a signed contract does not automatically mean that every part of it is enforceable.

The actual legal position depends on:

• The Wording
• Your Role when it was agreed
• Employer's legitimate interests
• Duration
• Scope
• Circumstances of termination

What Happens if I Ignore the Covenants?

If your former employer believes you are breaching enforceable restrictions, it may take legal action.

This could include seeking:

• An Interim injunction
• A Final injunction
• Damages
• Legal costs

An interim injunction can be particularly significant because the employer may ask the court to stop the disputed activity before a full trial takes place.

For example, an injunction might prevent you temporarily from:

• Joining a competitor
• Dealing with certain customers
• Soliciting clients
• Approaching particular employees
• Using confidential information

Because restrictive-covenant disputes are time-sensitive, court proceedings can move quickly.

Can My New Employer Also Become Involved?

Potentially.

A new employer may become involved where it is alleged to have knowingly encouraged or procured a breach of your contractual obligations.

It may also face separate issues if confidential information belonging to your former employer is used within the new business.

For this reason, a prospective employer may ask to review your restrictive covenants before you start.

Can Restrictive Covenants Be Negotiated?

Yes.

Restrictions may sometimes be negotiated:

• Before starting employment
• On promotion
• When resigning
• During settlement negotiations

For example, an employer might agree to:

• Shorten the restricted period
• Remove a non-compete
• Limit the customers covered
• Allow employment with a named competitor
• Waive particular restrictions

Any waiver or variation should preferably be confirmed clearly in writing.

If significant restrictions affect a proposed job move or business venture, it is sensible to understand their likely enforceability before acting in a way that could trigger urgent court proceedings.