Restrictive Covenants and Compromise Agreements

Employment contracts

Employment contracts are the foundation upon which the employee/employer relationship is based so it is vital to ensure that your interests are protected.

Because we act for employers as well as senior employees, we have a valuable perspective which gives us the skill to safely negotiate the best terms for either.

Well drafted employment contracts can avoid post termination disputes over matters, such as Restrictive Covenants from arising or escalating.

Our specialist employment lawyers advise on all aspects of employment contracts, policies and procedures. We act  for a variety of organisations ranging from UK and US law firms (including magic circle firms), financial institutions, banks to fund and asset managers.  We also act for organisations in the technology, oil, retail, auctioneering, and market research and recruitment sectors, as well as for senior employees.

Compromise Agreements

A compromise agreement is a written agreement setting out the terms upon which an employee gives up any claims they may have against their employer, generally in return for a sum of money. Ordinarily it will also include provisions for termination payments, confidentiality, restrictive covenants and non-disparagement clauses.

For a compromise agreement to effectively settle certain claims against the employer, the agreement needs to satisfy certain set criteria.  One such criterion is that the employee must have received advice from an independent "advisor" on the terms and effect of the agreement. For this reason the agreement will often provide for a contribution to be made by the employer towards the employee's legal fees.

Restrictive Covenants

Restrictive covenants or (post termination restrictions) are used to protect business interests by stopping senior employees competing when they leave. They may be in the employment contract or in a Compromise Agreement which is established upon termination of employment.

There are three main types of restrictive covenants:

• Non-compete covenants, which restrict former employees from working for a competitor;
• Non-solicitation covenants, which prevent former employees approaching clients, customers or staff to work with them instead of you; and
• Non-dealing covenants, which prevent the former employee from dealing with customers or clients (no matter who made the approach).

Our team of employment law specialists advises senior employees in all industries on restrictive covenants both when they are negotiating to join a new employer and when they are thinking about leaving.  We also act in many city and financial services focused disputes relating to restrictive covenants, including team moves. 

Our employment law solicitors have expertise in advising on restrictive covenants and in-depth litigation skills and experience in obtaining and carrying out search orders, defending and obtaining injunctions to enforce restrictions as well as springboard injunctions (preventing competitors gaining an unfair competitive advantage) and advising on multi-jurisdictional and territorial issues.  

Partnership agreements

Partnerships or LLPs are a very common business structure and there are many legal aspects to consider no matter whether you are setting up as a partnership, making the transition to Limited Liability Partnership (LLP), recruiting partners or dealing with a dispute arises.

Our team of employment law specialists provide advice to partnerships and LLP’s on the impact of, planning for and contractual elements of lateral hires and team moves. Key considerations include the mitigation of any restrictions or obligations in relation to the recruit’s old firm as well as the negotiation of the partnership agreement.

We also advise firms on how best to deal with disputes and find practical solutions to partnership disagreements.

We also regularly  provide advice to partners on the impact of any restrictions and obligations in relation to their old firm as well as the negotiation of the partnership agreement so that their position is secure in their new role.

For more information please contact Richard Fox at rfox@kingsleynapley.co.uk.