A restrictive covenant can look like a few routine paragraphs near the end of an employment contract or settlement agreement. Yet it may affect which roles you can accept, which clients you can contact and how freely you can start a business after leaving. Knowing how to assess restrictive covenants before you sign can prevent an unpleasant surprise when your next opportunity arrives.
The starting point is not whether a clause feels unfair. It is whether it goes further than is reasonably necessary to protect a legitimate business interest. That assessment is fact-specific, and the wording, your seniority and the work you actually did all matter.
What restrictive covenants are designed to protect
Restrictive covenants are post-termination promises. They seek to limit certain activities after employment ends, usually for a fixed period. In UK employment contracts and settlement agreements, the most common restrictions concern competing work, clients, prospective clients, suppliers, confidential information and colleagues.
An employer cannot use a covenant simply to stop a former employee earning a living or to remove ordinary competition from the market. To be enforceable, a restriction must protect a legitimate interest, such as confidential information, client relationships or a stable workforce. It must also be no wider than reasonably necessary for that purpose.
For example, a senior salesperson with responsibility for key accounts may be subject to a carefully drawn client non-dealing restriction. The same restriction may be harder to justify for an employee who had no contact with customers or influence over commercial relationships. Job title alone is not decisive. The substance of the role matters.
How to assess restrictive covenants clause by clause
Do not read a covenant as a single block of legal wording. Separate each restriction and ask what it stops you doing in practice. A non-compete clause, for instance, can have a very different impact from a clause preventing you from soliciting named clients.
Check the activity being restricted
Start with the verbs. Does the clause prevent you from being “engaged”, “concerned”, “interested” or “involved” in a competing business? Very broad language can potentially catch employment, consultancy work, directorships, investments and work through another person or company.
A sensible clause should be clear about the activity it is trying to prevent. If it is intended to stop you approaching clients you dealt with, it should not automatically prevent you accepting a role that has no connection to those clients. Similarly, a restriction on competition should be tied to business activities that genuinely overlap with the employer’s business, rather than every activity carried out by a large corporate group.
Look carefully at whether the covenant distinguishes between soliciting clients and dealing with them. A non-solicitation clause generally concerns actively approaching a client. A non-dealing clause can be wider because it may prevent you from accepting work from a client even where they approach you first. That difference can be significant when considering a new role.
Consider the people, clients and business covered
Words such as “any client”, “any prospective client” or “any employee” may be too broad, depending on the circumstances. A restriction is more likely to be proportionate if it is limited to people you had material dealings with, responsibility for or confidential knowledge about during a defined period before your employment ended.
The definition of a prospective client deserves particular attention. It should not extend to every organisation that has ever appeared in a sales database or been the subject of a speculative conversation. There is a meaningful difference between a genuine, live commercial opportunity and a name on a marketing list.
For employee restrictions, consider whether the clause is limited to colleagues you worked closely with or could influence. Preventing the recruitment of a whole workforce may be difficult to justify where you had no relationship with most of those people.
Test the time period and geographical reach
There is no automatic “safe” length for a covenant. A restriction lasting three, six or 12 months is not enforceable merely because that period appears regularly in contracts. The reasonable period depends on the business, the role, the length of client relationships and how quickly information becomes out of date.
Ask what the employer needs time to protect. In some roles, a short handover period or the natural cycle of a tender process may be relevant. In others, a lengthy restriction may be hard to defend. The same applies to geography. A nationwide or worldwide restriction may make sense for a genuinely international role, but it may be excessive for an employee with a local client base.
Compare the covenant with your actual role
Restrictive covenants should be assessed against reality, not only the contract wording. Consider your access to commercially sensitive information, your involvement with customers, your authority over staff and your knowledge of future plans.
If you moved roles internally, check whether the restrictions were introduced or amended when your responsibilities changed. New or tougher covenants can require proper consideration to be legally binding, particularly where they were added after employment began. There can also be questions about whether the employer clearly communicated and obtained agreement to the revised terms.
Review the whole contract, not only the restriction
A covenant rarely stands alone. Your notice period, garden leave provisions, confidentiality obligations and post-termination duties may all affect the practical position.
Garden leave can keep you employed, paid and away from work during notice. A post-termination restriction may begin only after employment ends, meaning the combined period away from the market can be substantial. Whether that is reasonable depends on the facts, but it should be identified before you agree to leave.
Confidentiality clauses need separate consideration too. Employers can protect genuine trade secrets and confidential information, but a clause should not improperly prevent you from using your general skills, experience and knowledge. Nor should it prevent protected disclosures or stop you cooperating with a regulator, police force or court where the law permits or requires it.
Also check for clauses that say restrictions operate independently, or that allow a court to remove part of a clause and preserve the rest. These provisions do not make an excessive covenant automatically enforceable, but they can affect how a dispute is argued.
Restrictive covenants in a settlement agreement
A settlement agreement often repeats existing restrictive covenants, confirms that they remain in force or introduces new ones. This deserves careful attention. Signing a settlement agreement can strengthen the evidence that you agreed to the wording, even if there may still be arguments about its enforceability.
New restrictions are commonly negotiable, especially where they would materially limit your next move. If the employer wants greater protection than your original contract provided, it is reasonable to ask why, how the proposed wording reflects your role and whether the compensation properly recognises the restriction.
The agreement should make clear whether the restrictions are new, replacement terms or a restatement of your existing obligations. Ambiguity can create avoidable risk. It is also worth checking that the termination date, notice arrangements and any garden leave are consistent with the period for which restrictions apply.
Questions to answer before signing
Use the following questions to turn legal wording into a practical decision:
- What job, business or client work would this clause prevent me from taking on?
- Is it limited to customers, colleagues or information I actually dealt with?
- How long does it last, and when does that period begin?
- Is the restricted business activity and geographical area defined sensibly?
- Does the proposed settlement agreement add to, replace or repeat my existing restrictions?
- Will garden leave, notice pay or a new role make the restriction more burdensome in practice?
Your answers may show that the covenant is manageable. They may also reveal wording that could block a planned role, delay a business launch or create uncertainty for a prospective employer. That is the point at which clarification or negotiation is most valuable, rather than waiting until after you have signed.
When to seek tailored advice
You should obtain specific legal advice if you are joining a competitor, taking clients into a new business, recruiting former colleagues or are unsure whether a proposed role falls within a restriction. The risk is not limited to whether an employer would ultimately succeed in court. A threatened injunction, correspondence with a new employer or uncertainty during a job move can itself be disruptive.
Independent advice on a settlement agreement should cover more than the payment figure. It should explain what you are giving up, including the practical effect of restrictive covenants, confidentiality commitments and any promises about future conduct. If a term is too broad or unclear, it may be possible to seek narrower wording, a shorter period, clearer definitions or appropriate compensation.
A covenant is not necessarily a reason to reject an otherwise fair settlement. Equally, it should not be treated as boilerplate. Read it with your next move in mind, ask direct questions and make sure the agreement gives you clarity rather than a restriction you only discover when an opportunity matters.