What is a restrictive covenant?

A restrictive covenant, or restraint of trade, is an express term in a contract of employment which seeks to prevent the 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 with 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. Also, where a clause has been drafted too broadly the courts will normally find it invalid rather than rewrite it.