How to approach post-termination restrictions

Travel Weekly has teamed up with leading industry employment lawyer Ami Naru for a regular column offering answers to readers’ legal questions on employment/HR matters. Ami will cover the latest employment issues facing the industry and respond to questions and dilemmas posed by you. In this column, Ami answers a reader’s questions about the specifics of post-termination restrictions. 

Q.

People who work in travel tend to stay within the industry for a long time, but I notice employees moving from one employer to a competitor all the time. Are post-termination restrictions of any use to stop this happening?

A.

The travel industry is close-knit and built on relationships, whether with clients, suppliers or within teams. When employees move to a competitor, they often take valuable insights and connections with them. For employers, this can mean a risk of losing clients, leaking strategy or seeing confidential information used elsewhere. Employees will move jobs for a variety of reasons, but whether post-termination restrictions can prevent an employee from going to work for a competitor is a question of fact. 

In theory, having post-termination restrictions could stop an employee from working for a competitor – but only if post-termination restrictions contained within the contract of employment are carefully drafted. These restrictions, sometimes called restrictive covenants, aim to protect your business when someone leaves. Many employees will not have read their contract since joining your company. Should they resign, it is important to clarify restrictions that will apply to them post-employment in terms of what they can and cannot do.

Restrictive covenants can stop former employees from poaching clients, joining a direct rival or using sensitive information. As a general rule, restrictive covenants are unenforceable and will only work if they’re reasonable and tailored to the role. Overly broad restrictions often won’t hold up in court. 

In terms of the types of restrictive covenants that employers often use, these are typically:

• Non-compete clauses – to stop someone joining a rival for a set time;
• Non-solicitation clauses – to prevent them contacting your clients or staff;
• Non-dealing clauses – to block them from working with clients even if the client initiates; and
• Confidentiality clauses – to safeguard trade secrets and business data.

In the travel industry, they’re often found in contracts for sales staff, account managers or anyone with client exposure.

However, restrictive covenants need to be well drafted to be enforceable, and this means they must protect a legitimate business interest, such as customer relationships or confidential information. They also need to be reasonable in duration and scope – for example, six months in a defined geographical region.  

Finally, they must be specific to the employee’s role. What’s reasonable for a director wouldn’t fly for a junior travel consultant. Courts don’t like anything that unfairly stops someone earning a living, so one-size-fits-all clauses often fail.

Restrictive covenants need to be tailored to each individual. Getting a lawyer to review covenants is a sensible investment.

A word of caution, though: post-termination restrictions could damage your employer brand if used heavy-handedly. If your business becomes known for aggressive legal tactics or “locking people in”, it might deter good employees from joining you in the first place. Restrictions should protect and send out a clear message, not punish.

• This article is not a substitute for formal legal advice.