As globalisation and employee mobility continue to increase, we are frequently asked by employers whether a non-compete or other restrictive covenants (such as a covenant against the non-solicitation of customers or employees) is enforceable in a particular jurisdiction.

The issue arises in a variety of contexts, including when a company is considering hiring a candidate whose employment contract includes restrictive covenants, whether to include restrictive covenants in an executive employment contract or other employment agreement (such as a share or bonus plan) and, increasingly as the economic situation improves, whether a non-compete or other restrictive covenant can be enforced against a departing employee. As the war for talent increases, many employers understandably wish to protect themselves against the risk that their employees will – after building valuable relationships with customers or having access to the employer’s confidential information and intellectual property – go to work for a competitor.

The first step for many employers is to ensure that employees are not tempted to leave by keeping them motivated and appropriately remunerated. In addition, however, most employers will also adopt defensive measures – such as contractual confidentiality provisions and restrictive covenants – to protect their business.

A global form of restrictive covenant?

Multinational employers like to have documents and policies that are consistent and similar in all of the countries where they operate so as to reduce the administrative burden and to foster a common culture and approach. Accordingly, such employers are often tempted to roll-out globally the form of restrictive covenant and confidential information provisions that are used in the ‘home’ jurisdiction. While such an approach meets the desired aim of consistency and can have a deterrent effect on employees, such an approach is very risky from an enforcement perspective.

Jan-Mar 2016 issue

Morgan Lewis