One of the most common questions employees ask after receiving a Settlement Agreement is whether their former employer can prevent them from working for a competitor or setting up a competing business.

The answer depends on the terms of both your employment contract and your Settlement Agreement.

Many Settlement Agreements either repeat, amend or introduce post-termination restrictions—often called restrictive covenants. Understanding exactly what these clauses mean is important before deciding whether to sign.

Our specialist Employment Solicitors will explain these provisions in plain English and advise whether they are reasonable and whether they should be negotiated.

What are restrictive covenants?

Restrictive covenants are contractual clauses that place limits on what you can do after your employment ends.

Their purpose is usually to protect an employer’s legitimate business interests, such as confidential information, customer relationships and key members of staff.

Common restrictions include:

• Working for a competitor.
• Starting a competing business.
• Contacting former clients or customers.
• Soliciting former colleagues.
• Dealing with clients you previously worked with.
• Using confidential business information.

The exact restrictions will depend on the wording of your agreement.

Does my Settlement Agreement create new restrictions?

Sometimes.

In many cases, a Settlement Agreement simply confirms that the restrictive covenants contained in your original employment contract will continue to apply.

In other cases, the Settlement Agreement may:

• Amend existing restrictions.
• Shorten or extend the period they apply.
• Clarify their wording.
• Introduce new restrictions as part of the negotiated settlement.

It is important not to assume that the restrictions remain unchanged.

Your solicitor will compare the Settlement Agreement with your employment contract and explain any differences.

Can my employer stop me working for a competitor?

Not automatically.

Whether a restriction can be enforced will depend upon a number of factors, including:

• The wording of the restriction.
• The type of work you carried out.
• Your seniority within the business.
• The employer’s legitimate business interests.
• Whether the restriction is reasonable in terms of its duration, geographical scope and overall effect.

Each case turns on its own facts, and the enforceability of restrictive covenants is often a complex legal issue.

Can these clauses be negotiated?

Often, yes.

If a restrictive covenant is likely to make it difficult for you to find new employment, there may be scope to negotiate amendments before you sign the Settlement Agreement.

Possible changes might include:

• Reducing the length of the restriction.
• Narrowing its geographical area.
• Limiting the categories of clients affected.
• Removing unnecessary restrictions.
• Clarifying ambiguous wording.

Negotiating these issues at the time of settlement is often much easier than disputing them after your employment has ended.

What happens if I breach a restrictive covenant?

The consequences will depend upon the wording of the agreement and the circumstances of the breach.

An employer may, in some cases, seek legal remedies if they believe a valid restrictive covenant has been breached.

Before accepting a Settlement Agreement, it is therefore important to understand:

• Which restrictions apply.
• How long they last.
• Whether they are likely to affect your future employment.
• Whether amendments should be negotiated.

What if I already have another job?

If you have accepted—or are about to accept—a new role, you should carefully review any restrictive covenants before signing your Settlement Agreement.

Questions to consider include:

• Will your new employer be a competitor?
• Will you be working with former clients?
• Will you be using confidential information?
• Could the restrictions delay your start date?

These issues can often be addressed during negotiations if they are identified early.

How Pepperells can help

Our specialist Employment Solicitors regularly advise employees on restrictive covenants and Settlement Agreements.

We’ll:

• Review your employment contract and Settlement Agreement.
• Explain which restrictions apply.
• Assess whether the proposed restrictions appear reasonable.
• Identify clauses that may affect your future career.
• Advise whether amendments should be negotiated.
• Negotiate improved wording where appropriate.

Our objective is to ensure that your Settlement Agreement allows you to move on with confidence whilst protecting your future employment opportunities.

Protecting your next career move

Accepting a Settlement Agreement should not create unnecessary barriers to your future.

Before signing, it is important to understand whether any restrictive covenants could affect your ability to work elsewhere and whether those restrictions are appropriate.

With specialist legal advice, you can make an informed decision and avoid unexpected problems after your employment has ended.

Speak to a Specialist Solicitor

If you’re concerned that your Settlement Agreement may restrict where you can work in the future, Pepperells can help.

Our specialist Employment Solicitors will review the restrictive covenants, explain how they affect you and advise whether the provisions should be negotiated before you sign.

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