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Post Termination Restrictions

Protecting the business interest

Post-termination restrictions are often used as means to try and ensure that key employees do not pass on expertise or business confidential information to competitors when moving between roles.

It is important to remember that for restrictions to be enforceable, they must not go further than is reasonably necessary to protect legitimate business interests. This means that care should be taken to ensure that the restrictions are drafted with reference to the particular duties of the employee, their role, their access to confidential information, and with limitations to the period and geographic scope of the restriction. For example whilst it will not be enforceable to have a blanket ban on employees leaving to join competitors, it may well be enforceable to prevent them from doing so for a period of time.

If the employer wants to protect their business interests by imposing new restrictions as part of the settlement agreement, additional payments or ‘consideration’, should normally be attributed to the restrictions in order to assist enforceability, and also to protect the ex-gratia payment from arguments that it is the consideration and as such taxable.

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