Restrictions in Assignment Contracts

Employers, keen to protect the stability of its workforce, trade secrets, confidential information, and client connections, often use post-termination restrictions in employee contracts to prevent employees from engaging in certain activities after employment ends.  Such restrictions can range from preventing employees from competing for a specified period, or from poaching key members of staff from the business.  Under UK law, such restrictions can be enforceable if there is a legitimate business interest to protect, and if the restrictions go no further than necessary to protect that interest.  Widely drafted restrictions are unlikely to be enforceable in the UK (and in other jurisdictions).  When drafting the restrictions, employers should consider fully the specific interests it is seeking to protect and draft the restrictions so that that they are no wider than reasonably necessary to protect those interests.

Employees within a global company are often placed on secondment or assignment in another part of the company in a different jurisdiction.  One question that often arises is, should post-termination restrictions be included in an assignment agreement if they are already included in the employee’s home country contract.  The short answer is probably yes.  It will certainly depend on the nature of the assignment, and what was considered when the initial restrictions were drafted. In an ideal world, the employer would have already had in mind the interests of any group company in the other jurisdictions for which the employee may work during their employment. If this was not the case, it might be necessary for the assignment agreement to either include its own new set of restrictions, or for the existing restrictions to be modified.

It is important to remember that what might be enforceable in one jurisdiction may not be in another – employers should always take advice on the likely enforceability of those restrictions in the new jurisdiction.

Article by

Nina Khuffash, Associate