Restraint of trade in employment


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Employment expert
Practice notes

Restraint of trade in employment


Published by a ÀÏ˾»úÎçÒ¹¸£Àû Employment expert

Practice notes
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This Practice Note examines the doctrine of restraint of trade and Lawful exceptions to it in the employment context. It considers when the doctrine will apply and looks at examples of indirect restrictions or covenants, and payments made under them (eg pensions, profit-share, bonus, commission, training costs, retention bonuses, garden leave and share options), and their treatment by the courts. It also considers when a post-termination restriction (ie restrictive covenant) will be lawful.

It is a basic principle of Common law that an individual should be free to follow their trade or calling when, where and in what manner they wish. Lord MacNaughton in Nordenfelt stated:

‘The public has an Interest in every person’s carrying on his trade freely: so has the individual. Interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void.’

The starting point when considering post-termination restrictions is therefore that any restraint of trade is unlawful unless it falls within one of a number of lawful

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Jurisdiction(s):
United Kingdom
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Law definition
What does Law mean?

means: (a) any legislation, regulation, by-law or subordinate legislation in force from time to time to which a party is subject and/or in any jurisdiction that the Services are provided to or in respect of; (b) the common law and laws of equity as applicable to the parties from time to time; (c) any binding court order, judgment or decree; (d) any applicable industry code, policy or standard; or (e) any applicable direction, policy, rule or order that is binding on a party and that is made or given by any regulatory body having jurisdiction over a party or any of that party’s assets, resources or business;

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