Sean Dempsey, an associate in Lewis Silkin's employment and incentives department, advises how to recognise (and wriggle out of) restrictive covenants in employment contracts.
If you're signing a contract to work in an investment bank, you'll invariably come across a clause known as a 'restrictive covenant', designed to restrict your room for manoeuvre should you move to another job.
Restrictive covenants come in three main guises:
· Non-solicitation clauses - restrictions on doing business with your former employer's clients. These must generally be confined to clients you had 'material contact' with during your employment - if not, they'll probably be unenforceable. Moreover, a covenant that only prohibits 'solicitation' of clients, as opposed to 'dealing with' them, cannot prevent you from doing business with clients who follow you to your new employer off their own bat.
· Anti-poaching clauses - limits on making moves to recruit your former colleagues. An anti-poaching restriction will potentially be enforceable against you, but only if it's confined to the grades of staff or parts of the business in which you worked. And it shouldn't prevent your former colleagues from resigning and joining you of their own free will (ie, without your active encouragement).
· Confidentiality clauses - preventing you using sensitive information obtained during your employment. Whether your employer can prevent you from using confidential information will depend on the nature of your employment, whether the 'secret' data can be easily separated from non-confidential information, and just how far your employer made it clear that the material in question was sensitive.
You should scrutinise your new contract for all three types of covenant and make sure you are happy with their scope, taking specialist advice as necessary. After all, you may be signing a new employment contract now, but you're likely to move on at some time in the future.