Post-termination restrictions

Post termination restrictions prevent employees of the company from doing certain things once their employment ends. The employer needs to ensure that all required restrictions are in the employee's contract or compromise agreement.

The most common restrictions that employers use are:

  • A non-compete clause  prevents the employee from working in direct competition with the Company from a period of time at the end of their contract;
  • A non-solicitation clause prevents the employee from being able to canvass customers away from the Company for a period of time;
  • A non-dealing clause prevents the employee from carrying out any business for customers of the Company for a period of time;
  • A non-solicitation of employees clause  prevents the employee from poaching staff from the Company for a period of time.

Restrictions may also apply to the non-disclosure of confidential information, publishing derogatory comments about the Company etc.

These restrictions are only enforceable if they were written into the employee's original contract or have subsequently been agreed for a consideration in, for example, a severance agreement.  They must also be reasonable in the light of the employee's seniority and legitimate in terms of genuinely protecting the Company's business.

When a court deals with restrictive covenants within an employee's contract, it will only accept legitimate restrictions and strike out any which are considered to be too broad, punitive in nature or seen to be restraint of trade. 

If the employee breaches the restrictions, the employer has the right to apply to the high court for an order restraining the employee from continuing the breach.  In the event that the employee's new employer has encouraged the employee to breach these restrictions, the new employer may be enjoined in any action for inducing the employee to breach his or her contract.