What is a Non-Compete Agreement?

It’s never ideal when a valued member of staff leaves your business, especially when it's to set up on their own or to join a competitor.

Due to this, many organisations will have a non-compete agreement in place to protect their business’s interests.

What is it?

Including a non-compete agreement clause in employees’ contracts will enable you to prevent them from working for a competitor for a pre-determined amount of time.

This non-compete confidentiality agreement is designed to protect valuable information, such as client lists or business secrets, being immediately used against the company.

How long can it last?

Employees who sign this are required to abide by its restrictions, which usually last between 3-12 months.

It’s also possible to include a geographic limitation that prevents former employees from working for a competitor that’s located nearby and may, therefore, be in direct competition for work.

How common are non-compete agreements?

The truth is, they are extremely common, especially in the contracts of senior employees, although it is also possible to include these in the contracts of the entire workforce.

They also tend to be more prevalent amongst those working in the highly competitive legal or financial sectors, where losing an employee to a competitor can have a significant impact, especially if they are able to poach clients or use valuable intellectual capital to their advantage.

Testing reasonableness

Are non-compete agreements enforceable in the UK? Yes, providing they’re reasonable.

To rely on a company non-compete agreement you will need to be able to show that it is designed to protect a legitimate business interest and goes no further than is reasonably necessary.

Usually, an agreement will be limited in terms of what activities are restricted, how long it lasts for and its geographical scope.

If either of these are deemed wider than necessary, then you’ll be unable to enforce the non-compete agreement - UK law will consider it void.

What happens if they violate it?

Violating non-compete agreements is a breach of a legal contract, which means you will be able to seek an injunction as long as the agreement was reasonable in the first place.

You should write to the court in the hope that they uphold the conditions of the agreement and order the employee to leave their new employer, or cease operating their own business in competition.

In some circumstances, you may even be able to seek financial compensation from the former employee for profits lost due to the breach of the non-compete agreement.

However, this’ll require you to show that there was an actual loss, which may be difficult to prove.

Need our help?

If you’re looking to protect valuable business assets, then get in touch for immediate assistance on this issue. Contact us on 0800 028 2420 and book a free consultation with an HR consultant today.