I am worried about our senior employees joining a competitor and using our confidential information, if they leave employment with us. There are no post-termination restrictive covenants in their service agreements. How do I handle it?

This is not a straightforward query and it is fraught with legal risk. I have summarised below some considerations which you will need to take into account, when dealing with this issue.

As you have recognised, is important to have commercial protections in the employment contracts of senior employees. Senior employees will likely have knowledge of strategic business information or customer contacts that they could try to use for the benefit of a new employer or business which they set up themselves after leaving employment.

If you want to introduce post-termination restrictive covenants into the employment contracts of your senior employees, this will amount to a “variation” of their contractual terms.

For a variation to an employment contract to be enforceable, it must be supported by “consideration”. This means that an employee must receive something of value in return for the introduction of a new term of employment. Continued employment is considered to be valid consideration to support a contractual variation, where the change affects the employee straight away and is beneficial to them. However, a post-termination restrictive covenant only takes effect at a later date, after termination.

In addition, a post-termination restrictive covenant is clearly “detrimental” to an employee, as it seeks to restrict the individual’s activities after the termination of their employment. Continued employment in these circumstances will likely not amount to valid consideration for the contractual variation. We would, therefore, recommend that the introduction of post-termination restrictive covenants is, for example, linked to a pay rise, or a one-off payment is made to an employee in return for their signing up to the new restrictions. The provision of consideration should be well documented.

Another important point is that you will need to consult with the senior employees, to try to obtain their agreement to the introduction of new post-termination restrictive covenants in their terms and conditions of employment. You will need to explain why the proposed introduction of new post-termination restrictive covenants is necessary for the business. Alternatively, the variation could be imposed on the senior employees unilaterally, and reliance could be placed on their conduct afterwards, in order to establish their implied agreement to the change. It would be important to ensure that valid consideration is provided in both of these scenarios.

Alternatively, if the senior employees refuse to accept the introduction of new post-termination restrictive covenants, another option is to dismiss the employees and offer them immediate re-employment on new terms, including the new post-termination restrictive covenants.

Of course, where action is taken in the absence of employees’ agreement to the variation, you risk unfair dismissal claims being brought against the company.

You will also need to consider the post-termination restrictive covenants that you wish to introduce. Post-termination restrictive covenants are only enforceable if they are “reasonable”, and it is for the employer to show that they are. In general, it will be more difficult for an employer to prove that a post-termination restrictive covenant restricting an employee from competing with the company after their employment has ended is reasonable and enforceable.

This is because such a restriction will have the most restrictive and detrimental effect on what an employee can do. You should consider whether other, less drastic post-termination restrictive covenants might do the job of protecting the company’s confidential information, such as non-solicitation of employees, non-solicitation of customers; non-interference with suppliers or non-dealing with customers. Such post-termination restrictive covenants are likely to be looked on more favourably by a court, in respect of their enforceability.

Finally, you should consider how much you can restrict the effect of the post-termination restrictive covenants, to ensure that the protection sought is no more than is reasonable. For example, you could limit a non-compete restriction to a certain geographical area.