What is a restrictive covenant?

A restrictive covenant is a written term in a contract of employment which seeks to prevent an employee from carrying out a particular activity, usually in competition with the employer.

As such, it is an area of law which tries to balance the freedom of employers to protect their business and the freedom of the individual to move to other employment.

Restrictive covenants are only likely to be upheld if:

  • they can be shown to be protecting the legitimate business interests of the employer;
  • are in the public interest; and
  • do not unreasonably prevent the employee from earning a living (e.g. are not drafted too broadly).

The wider the scope of such a clause, the less likely it is to be enforced. Where a clause has been drafted too broadly, the courts will normally find it entirely invalid rather than accept part of it or rewrite it.
