When Senior Employees Compete: Enforcing Restrictive Covenants and Confidentiality Obligations

The Risk When Senior Employees Leave

In the competitive landscape of modern business, the departure of senior employees is rarely a neutral event. Unlike junior staff, senior employees often have unfettered access to sensitive corporate knowledge, extensive client relationships and influence over teams. Their exit can therefore pose an existential risk if not managed appropriately.

Typical scenarios illustrating the risks include:

Client poaching: A former executive may leverage relationships developed over years to divert clients to a new venture or a competitor.

Staff solicitation: Departing employees sometimes persuade colleagues to leave, disrupting business continuity.

Misuse of confidential information: Knowledge of pricing models, strategic plans, or intellectual property may be exploited for personal gain or to benefit a competitor.

Direct competition: Senior employees might establish rival businesses in direct contravention of their contractual obligations.

The legal mechanisms to mitigate these risks are primarily restrictive covenants and confidentiality clauses, embedded within employment contracts. Restrictive covenants place limits on what a departing employee can do post-employment, while confidentiality obligations safeguard trade secrets and commercially sensitive information indefinitely. When enforced correctly, these contractual protections can protect a business’s goodwill and its competitive edge.

Understanding Restrictive Covenants

Restrictive covenants are contractual promises that restrict certain post-employment activities. In the UK, their enforceability is subject to strict scrutiny by courts to ensure they are reasonable in scope, duration, and geographic reach. Overly broad or punitive restrictions are likely to be struck down.

Main Types of Restrictive Covenants

1. Non-Compete Clauses: These clauses prevent former employees from working for or establishing a competing business within a defined geographic area for a set period. They are the most contentious and closely scrutinised by courts.
2. Non-Solicitation of Clients or Customers: These clauses restrict the employee from directly or indirectly soliciting or servicing clients of the former employer. Courts tend to favour enforcement of these when they protect legitimate business interests and are time-limited.
3. Non-Poaching of Employees: Restricting the solicitation or recruitment of colleagues can be enforceable if it protects the employer’s workforce and avoids destabilising teams.
4. Non-Dealing Clauses: Sometimes, a combination of non-compete and non-solicitation clauses extends to indirect dealings, such as assisting a third party to compete or divert business.

Enforceability in UK Law

UK courts evaluate restrictive covenants against the “reasonableness” test established in Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd [1894]. Courts examine whether the restriction protects a legitimate business interest and does not impose an undue burden on the employee. Factors include:

1. Duration: clauses lasting beyond 12-24 months for most sectors are usually considered excessive. Exceptions exist in specialised sectors (e.g., senior executives with highly sensitive knowledge).
2. Geography: restrictions must relate to areas where the employer actually conducts business. Global bans are rarely enforceable unless justified.
3. Scope of activity: restrictions must only prevent direct competition or the misuse of confidential knowledge, not general employment.

Examples:

• A 6-month non-solicitation of clients for a departing sales director is often upheld.
• A 3-year global non-compete for a mid-level administrator is likely unenforceable.

Subtle drafting matters: courts scrutinise whether a covenant is protecting a legitimate commercial interest rather than punishing an employee for leaving.

Confidentiality Obligations

Confidentiality clauses safeguard information that is not publicly available and gives the business a competitive advantage. Unlike restrictive covenants, confidentiality obligations typically endure beyond employment, and courts recognise their importance even in the absence of an explicit contractual term.

Implied Duties

Even without a written clause, employees owe a duty of confidence to their employer. The landmark case Faccenda Chicken Ltd v Fowler [1986] established that:

• Information must be genuinely confidential, not general knowledge or skill acquired during employment.
• The duty does not prevent employees from using general expertise or experience gained.

Confidentiality vs. Restrictive Covenants

While restrictive covenants constrain behaviour (e.g., no working for competitors), confidentiality clauses restrict the use of knowledge irrespective of employment. There can be overlap: a non-compete may indirectly protect confidential information by preventing competition, but it is not a substitute for an explicit confidentiality obligation.

Businesses should also be aware of the nuances of trade secrets under the UK Trade Secrets (Enforcement, etc.) Regulations 2018, which formalise protections against unlawful acquisition, use, or disclosure. Confidentiality obligations must be clear, specific, and communicated to be enforceable.

Detecting and Responding to a Breach

Early detection of a breach is critical. Senior employees may have digital access, physical files, or client relationships that allow rapid mobilisation of competitive activity.

Practical Steps

• Gather Evidence

1. 1. • Audit emails, downloads, and network activity.
      • Obtain witness statements where colleagues observe potential solicitation or misappropriation.
      • Maintain a clear audit trail for court admissibility.

• Cease and Desist / Reminder Letters

1. 1. • A letter can serve as both a warning and a legal step in preserving rights.
      • Clearly reference contractual obligations and request immediate cessation of the conduct.

• Internal IT Audits

1. 1. • Identify unauthorised use of proprietary systems.
      • Consider revoking access immediately to prevent further harm.

• Injunctions

1. • For immediate threats, interim injunctions may be sought to prevent irreparable damage.

Available Remedies

When a breach occurs, the law provides several remedies, ranging from injunctions to monetary compensation. It is important for employers to understand not only what these remedies are, but what is involved in securing them, the evidential thresholds, and the strategic considerations that may influence which remedy is pursued.

Injunctions

• Interim Injunctions: temporary orders to stop immediate or ongoing breaches. These are typically sought on an urgent basis, sometimes within days of discovering a breach. To obtain an interim injunction, the employer must demonstrate that there is a “serious issue to be tried” (as established in American Cyanamid Co v Ethicon Ltd [1975] AC 396), that damages alone would not be an adequate remedy, and that the balance of convenience favours the grant of the injunction. Employers must act quickly, as any delay can be interpreted by the court as evidence that the harm is not truly urgent or irreparable.
• Final Injunctions: permanent orders preventing future breaches. These are usually granted after a full trial and can restrain a former employee for the remainder of the covenant period. Courts will carefully assess whether the conduct complained of is likely to continue or whether its effects would cause lasting detriment.

Delivery-Up or Destruction

Courts may order the return or destruction of confidential materials, including digital files, documents, and intellectual property. This remedy is particularly valuable where the employee has downloaded, copied or transferred sensitive data shortly before departure. Employers should be prepared to demonstrate precisely what information has been taken and why its continued retention poses a risk. Orders can extend to requiring the employee to swear an affidavit confirming that all copies (including those on personal devices or cloud storage) have been deleted.

Damages or Account of Profits

Employers can claim losses directly caused by the breach or, in exceptional cases, seek an account of profits obtained by the employee. Damages may cover lost clients, reduced revenue, or the costs of mitigating harm. Evidence is crucial, courts will expect clear linkage between the breach and the financial loss. An account of profits, while harder to obtain, compels the former employee (or new employer) to hand over profits earned through wrongdoing, even if the employer cannot show specific losses. This is typically reserved for deliberate, egregious misconduct involving misuse of confidential information.

Springboard Injunctions

These prevent former employees from gaining an unfair head start using confidential information, even if no direct client loss has occurred. A springboard injunction is designed to “level the playing field” by preventing the former employee from benefiting from their wrongful conduct for a period justified by the nature of the advantage gained. Importantly, the court does not need to find an ongoing misuse of information, only that the misuse has conferred a competitive advantage. This makes springboard injunctions particularly effective where the employee has used confidential data to accelerate the launch of a competing business.

Urgent High Court Applications

For senior executives or key clients, urgent applications to the High Court can be necessary to prevent irreversible damage. Timing is crucial – courts are more willing to grant relief if the risk is imminent and irreparable. Employers should prepare detailed evidence, including witness statements, IT analysis, and documentary exhibits, at very short notice. The High Court can list hearings extremely quickly, sometimes within hours, where the circumstances justify urgent relief. However, the employer must provide full and frank disclosure, particularly for without-notice applications where the former employee is not present at the first hearing. Failure to do so can undermine the entire case.

Examples

Tullett Prebon v BGC Brokers [2011]

Highlighted the importance of promptly enforcing non-compete and non-solicitation clauses for senior brokers. Delay in action can weaken claims.

Faccenda Chicken Ltd v Fowler [1986]

Reinforced the principle that general knowledge and experience are not confidential, but sensitive client lists and strategic plans are protected.

Bartholomews Agri Food Ltd v Thornton [2017]

Demonstrated that even a relatively short non-compete/non-solicitation covenant may be held unenforceable if it was too widely drafted, imposed on a junior employee, or not tailored to legitimate interests.

Preventative Measures and Best Practice

The best defence against breaches is prevention.

Drafting Enforceable Covenants

• Align restrictions with role, seniority, and legitimate business interests.
• Use precise language regarding client categories, geographic reach, and duration.
• Avoid blanket non-competes; courts disfavour restrictions that are punitive rather than protective.

Regular Contract Reviews

• As employees are promoted, revisit covenants to ensure they reflect new responsibilities and risks.
• Tailor clauses for executives, technical experts, and client-facing staff differently.

Exit Procedures

• Remind departing employees of ongoing obligations, ideally in writing.
• Collect laptops, documents, and mobile devices, ensuring no sensitive material is retained.
• Consider exit interviews focused on confidentiality and compliance.

Cultural and Operational Safeguards

• Foster a culture where loyalty and confidentiality are valued.
• Implement IT monitoring and access controls to detect unauthorised usage early.

Acting Decisively and Strategically

Senior employee departures are high-risk moments for any business. The combination of well-drafted restrictive covenants, robust confidentiality clauses, and swift enforcement is critical to mitigating damage.

Early legal advice is essential – pre-action planning can make the difference between successful enforcement and lost commercial advantage. Employers should maintain a comprehensive employment contract framework and a strategic plan for monitoring and responding to potential breaches.

If you are facing a potential breach, acting quickly, proportionately, and with expert legal guidance is essential to safeguard your business interests. We usually offer a no-cost, no-obligation 20-minute introductory call as a starting point or, in some cases, if you would just like some initial advice and guidance, we will instead offer a one-hour fixed fee appointment (charged from £250 plus VAT depending on the complexity of the issues and seniority of the fee earner).

Please email wewillhelp@jonathanlea.net providing us with any relevant information ensuring that any call we have is as productive as possible or call us on 01444 708640. After this call, we can then email you a scope of work, fee estimate (or fixed fee quote if possible), and confirmation of any other points or information mentioned on the call.

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This article is intended for general information only, applies to the law at the time of publication, is not specific to the facts of your case and is not intended to be a replacement for legal advice. It is recommended that specific professional advice is sought before relying on any of the information given. © Jonathan Lea Limited.

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