Restrictive Covenants in a Settlement Agreement

Many employees feel nervous or apprehensive when they’re offered a settlement agreement. That’s normal and it is important not to act rashly. Understand that you don’t have to accept any terms proposed in a Settlement Agreement when it is put to you. Most things, including restrictive covenants, can be up for negotiation unless the alternatives proposed are unlawful etc. So don’t be pushed into signing anything until you’ve taken advice.

What are restrictive covenants?

Restrictive covenants are clauses in a Settlement Agreement (for the purposes of this article, they are also included in other contracts such as a Contract of Employment) that seek to restrict you from doing certain things. They tend to relate to non-competing, non-solicitation, non-poaching and confidentiality. So they’ll seek to prevent you from taking clients, and/or suppliers, and/or colleagues when you leave.

How should you deal with a restrictive covenant in a Settlement Agreement?

Whatever your employer has drafted, it is likely to be as much in their favour as possible. But that doesn’t mean the wording and impact cannot be reviewed, reduced, and shifted a little in your favour. For example, if the restrictive covenant seeks to prevent you from working with a competitor, but in doing so will prevent you  frrom getting another job, then a reworded version that allows you to work for competitor but restricts you from contacting/dealing with their existing clients… may be possible. The covenant would then still be protecting your current employer’s business interests but would not limit your ability to find work.

If your employer refuses to make the change, or you’re still not happy with what’s being proposed, YOU DON’T HAVE TO SIGN THE SETTLEMENT AGREEMENT.

It’s important to take advice from an employment law specialist before you consider your position. An employment law specialist who deals regularly with Settlement Agreements will be able to guide you through the negotiations and help you achieve the best agreement for your circumstances.

If you need advice about restrictive covenants in your settlement agreement, or would like to discuss your options with a specialist employment law solicitor, please call us on 0800 304 7255. We’re always happy to help.


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