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How to approach your restrictive covenants

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Article posted by Ryan Cleland-Bogle

Restrictive covenants, also known as post-termination restraints (“PTRs”), are widely used throughout the recruitment industry to protect businesses from the impact of employees leaving to set up or join a competing business.

If you’re looking to set up your own recruitment business, you should be fully aware of your restrictive covenants before going it alone. Not considering these terms carefully can lead to you breaching your previous employment contract, putting you at risk of legal claims from the outset.

Some points you should consider:

  • Read the non-competes before you sign a contract or take a new position. Don’t sign a contract that is too onerous in the first place. And definitely don’t sign a contract you don’t intend to honour!

  • If you are considering leaving your employer to compete, get legal advice beforehand as to the enforceability of both the breadth and length of your restrictive covenants.

  • As a rule of thumb, if you are a director of a recruitment business, your restrictive covenants will be longer and more enforceable.

  • Understand the detail. Some restrictive covenants say you may not deal with any clients/candidates/colleagues you’ve worked within the last 12 months, some say you may not solicit – there is a difference.

  • Do not be blasé. We have seen employers injunct and successfully take teams to court who’ve flagrantly broken their restrictions. It’s expensive, emotional and it slows you down. Absolutely not worth it!

  • Do not join a business that encourages you to break your restrictions. That should be enough a red flag to consider your other options.

It’s not as bad as you initially might think!

We speak to many recruitment consultants who are worried about how much their restrictive covenants will impact their chances of success with their own business. However, we always remind them to look on the bright side. Your period of restrictive covenants is a great opportunity to get out and build new relationships. If you've provided a great service to your clients in the past, they will work with you again once your restrictions are over and they will respect you for honouring them. ​

Additionally, you can always consult with a lawyer to see if your restrictions are still enforceable. In many cases there are loopholes due to all kinds of reasons, so don’t write off your dream of being your own boss too early!