Restrictive Covenant in UK Contracts: What It Means & Example Wording
A restrictive covenant is a contractual clause that limits what a party can do during or (more commonly) after the end of a contractual relationship. In employment law, restrictive covenants typically take four forms: non-compete (not working for a competitor), non-solicitation (not approaching clients), non-dealing (not transacting with clients regardless of who initiates), and non-poaching (not recruiting former colleagues). All are subject to the common law restraint of trade doctrine and must be no wider than reasonably necessary to protect a legitimate business interest.
Last updated: February 2025
When to Include a Restrictive Covenant
- In employment contracts for employees with access to confidential information, key client relationships, or specialised training that would benefit a competitor
- In shareholder and partnership agreements to prevent departing owners from competing with the business they helped build
- In business sale agreements to prevent the seller from immediately setting up a competing business
Example Wording
This example wording is illustrative only. Customise it to your specific circumstances and consider seeking legal advice.
Is a Restrictive Covenant Enforceable in the UK?
Restrictive covenants are prima facie void in the UK as restraints of trade. The employer bears the burden of proving that the covenant protects a legitimate business interest (trade secrets, client connections, workforce stability) and goes no further than is reasonably necessary. Courts assess reasonableness at the time the covenant was entered into, not at the time of enforcement. Key factors include duration, geographical scope, scope of restricted activities, the employee's seniority, and the consideration provided. Covenants in business sale agreements are given more latitude than those in employment contracts because of the more equal bargaining position.
Common Mistakes
- Using a one-size-fits-all approach — the same restrictive covenant will not be enforceable for a junior employee and a senior director. Covenants must be tailored to the individual's role and access to sensitive information
- Failing to review and update covenants when an employee is promoted — a covenant drafted for a junior role may be too narrow for a director, while one drafted for a director may be too broad for a junior
- Not providing fresh consideration when introducing new restrictive covenants for existing employees — continued employment may not constitute sufficient consideration, so additional consideration (such as a pay rise or bonus) should be provided
FAQ
Are restrictive covenants enforceable against employees in the UK?
Yes, but only if they protect a legitimate business interest and are no wider than reasonably necessary. UK courts scrutinise restrictive covenants carefully and will strike them down if they are too broad in terms of duration, geography, or scope. The employer bears the burden of proof.
Do I need to provide additional payment for a restrictive covenant to be enforceable?
In a new employment contract, the employment itself is generally sufficient consideration. For an existing employee, the position is less clear — continued employment may not be adequate consideration, particularly in jurisdictions that require fresh consideration for variations. Providing a pay rise, bonus, or other benefit when introducing new restrictions is best practice.
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Get Started FreeThis is guidance for UK businesses, not legal advice. Example wording is illustrative. Consult a solicitor for complex matters.
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