Restraints of Trade

You need to be able to trust other people when going into business. Employees, business partners or sellers might form relationships with clients, customers, patients, employees or suppliers while working in your business. These relationships leave your business exposed. It is wise to build robust and enforceable restraints of trade into employment, partnership or sale contracts to ensure that the goodwill that you have built cannot simply be taken from you when someone leaves.

Restraints of trade can be difficult to get right. An employer can direct an employee not to work in business competition during the course of employment and similar expectations can be expected of business partners. However, outside of those instances, contracts that merely restrain competition cannot usually be enforced.  A properly drafted restrictive covenant must protect your business interests and do no more. 

Many of our clients operating in the charity, healthcare and social-welfare sectors face added complexity when establishing whether a restraint of trade is in the public interest. There are a number of additional competing factors that come into play depending on the sector or market in which a charity, health-care provider or business is operating.

In practice, we often see restraints that were not drafted with these principles in mind. Sometimes they are just poorly drafted. Other times they are too broad. Often the timeframes are out of sync with the real needs of the business. Whether these flaws occur because the restraints are old, re-used or not drafted with sufficient care and attention, the consequences of an ineffective restraint of trade can be significant for your business.