Restrictive Covenants: Don't Let Them Restrict Your Future

Settlement agreements often include or modify restrictive covenants that can seriously limit your career options. Understanding and negotiating these restrictions is crucial.

Common Types of Restrictive Covenants

1. Non-Compete Clauses

Prevent you from working for competitors for a specified period (typically 3-12 months).

2. Non-Solicitation Clauses

Restrict you from:

Soliciting clients or customers
Poaching employees
Interfering with supplier relationships

3. Non-Dealing Clauses

Prohibit doing business with clients, even if they approach you.

4. Non-Poaching Clauses

Prevent recruiting former colleagues.

Enforceability

Key principle: Restrictive covenants are only enforceable if they protect legitimate business interests and go no further than reasonably necessary.

Factors Courts Consider:

Duration of restrictions
Geographic scope
Your level of seniority
Your contact with clients
Compensation provided

"Settlement agreements provide an excellent opportunity to renegotiate restrictive covenants. Employers often accept reduced restrictions in exchange for settlement certainty."

Negotiating Strategies

1. Reduce Duration

A 12-month non-compete might be reduced to 3-6 months, significantly improving your employment prospects.

2. Narrow Geographic Scope

If restrictions apply "worldwide," negotiate for your specific region or country only.

3. Define Terms Precisely

Vague definitions help employers, not you. Ensure clear definitions of:

"Competitor"
"Client"
"Territory"
"Similar business"

4. Carve-Outs

If you have a specific job offer, negotiate an exemption allowing you to accept it.

5. Payment for Restrictions

If your employer insists on strong restrictions, demand additional compensation. You're giving up economic freedom – it should cost them.

Real-World Impact

Consider this scenario:

Client case: Senior sales executive with a 12-month non-compete covering all of UK and Europe. This effectively prevented them from working in their field. We negotiated:
Reduction to 6 months
Geographic limitation to Southeast England only
£15,000 additional compensation
Specific carve-out for a role they'd been offered

If You Breach Restrictions

Breaching restrictive covenants can result in:

Injunction proceedings (court orders to stop you)
Claims for damages
Loss of settlement money (clawback provisions)

Always seek legal advice before accepting employment that might breach restrictions. Sometimes restrictions are unenforceable, but you need proper analysis.

Our specialists can advise on restrictive covenants in your settlement agreement and negotiate appropriate modifications.