Understanding restrictive covenants and furlough leave

As a result of the current COVID-19 pandemic, many employees will be made redundant through no fault of their own.  A significant number of employees will also find that they have restrictive covenants in their contracts of employment that are likely to hinder their search for alternative employment in the immediate aftermath of their redundancy. 

What are restrictive covenants?

Restrictive covenants typically affect those employees who are employed in sales or management roles or the provision of professional services.  They often prevent employees from seeking employment with a competitor or approaching customers with whom they had dealings whilst working for their old employer.  The covenants are usually limited in length for a period of between 6-12 months.

Restrictive covenants and garden leave

When employees are placed on garden leave, it is usual for a restrictive covenant to make provision that any period of time spent on garden leave should reduce the amount of time that the restrictive covenant should last for.  If there is no such provision then this is likely to present an employee with a legitimate ground of challenge in relation to the enforceability of the relevant restrictive covenant.  Therefore creating the question of what is the position in respect of time spent on furlough leave? 

Restrictive covenants and furlough leave

Many believe that there should be a similar reduction in the length of the restrictive covenant to take into account the time spent on furlough leave. Yet, as of the date of this article, there is no decided authority on this matter.  This is unsurprising as furlough leave is a completely new concept to employment law in the United Kingdom.  That said, there is no reason in principle why the approach of the Courts in the enforcement of restrictive covenants where employees have been placed on garden leave should be different to the position where employees have been placed on furlough leave.  This is because in both cases, employees will have been unable to make contact with any of their clients or customers (or have access to confidential information) and will effectively have been taken out of the market.  However, if an employee has been placed on flexible furlough, then their position may be entirely different due to the accessible contact with their clients and customers during their period of work.

Next steps 

Although there’s limited legal information currently on restrictive covenants and furlough leave, we are able to provide advice on the enforceability of restrictive covenant matters. We understand how difficult it can be when you lose your job, and the stresses of securing a new role can only be made harder when the uncertainty of restrictive covenants is involved. Our specialist employment department has a wealth of experience in providing advice in this area, contact them today on 02392 50 55 00 or email enqs@donnelly-elliott.co.uk.