Can I use employee restrictive covenants to protect my business?
A business that wishes to protect their confidential information, strategic plans, customer/client details or other information can use employee restrictive covenants as long as they are reasonable, having regard to the interests of the parties and the public interest.
A well crafted employee restrictive covenant will impede or prevent a rogue employee from using such business ‘secrets’. A business should not underestimate the harm that could be done for example where an ex-employee poaches your database of clients.
What are the main types of restrictive covenants found in Jersey employment contracts?
The standard types of restrictive covenants commonly found in Jersey contracts of employment are:
- Non-solicitation covenants – to prevent the employee approaching the clients, customers or suppliers of the former employer.
- Non-dealing covenants – to prevent the employee dealing with clients, customers or suppliers of the former employer, irrespective of which party approached the other.
- Non-poaching covenants – to prevent the employee poaching former colleagues.
- Non-competition covenants – to restrict the employee from competing with the former employer i.e. by working for a competitor or setting up their own competing business.
Will a restrictive covenant always be enforceable?
For a restrictive covenant to be enforceable, a Jersey employer must show that it is no wider than is reasonably necessary to protect its legitimate business interests.
The common law position in relation to Restrictive Covenants was set out in the leading Jersey case of Rossborough v Boon & Aziz.
In determining whether a restraint is reasonably necessary to protect the employer’s legitimate interests, the Royal Court will consider the following factors:
- Nature of the “protectable” business interests to protect.
- Nature and geographical spread of the employer’s business.
- Time period of the restraint’s application.
- Extent of the geographical restraint.
- Structure of the employer’s client base and the business goodwill.
- Characteristics of the employee, including his or her seniority, duties and possession of trade secrets and confidential information.
The Royal Court will also compare the employer’s protectable interest with the relevant employee characteristics to evaluate whether the Restrictive Covenant goes beyond what is necessary to safeguard the employer’s protectable interest.
If a Restrictive Covenant imposes a greater restraint than that which is reasonably necessary for the protection of the legitimate interests of the party seeking to uphold the Royal Court will in all likelihood determine it to be void and therefore unenforceable.
When should restrictive covenants be incorporated into an employment contract?
In order for there to be an enforceable restrictive covenant the clause should be incorporated within the employees employment contract when they are engaged. While it is possible to negotiate restrictive covenant clauses after the employee has signed their contract it is risky as the employee may refuse and or result in a breach of contract and or constructive unfair dismissal.
To adequately protect your Jersey business it is essential to consider the employee and not just use a standard, off-the-shelf clause, as this may not be good enough and your business could be at risk as a result.