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Small businesses urged to take a look at restrictive covenants
SMALL businesses owners are being urged to take a look at restrictive covenants in employment contracts to avoid potential legal pitfalls in 2014.
The HR Dept Basingstoke & Hart say the issue becomes important should an employee decide to leave and tries to poach business.
Karen Sanders, director of The HR Dept Basingstoke & Hart said business owners should ensure that post-employment restrictions are reasonable and robust in order to protect their businesses.
In often nightmare scenarios for small business owners, where a key member of the team leaves to join a competitor or to start up a similar business, a specific, personalised and strong restrictive covenant can help.
“A New Year’s resolution should be to take a good look in the employee files to make sure key members of staff have up-to-date and relevant terms and conditions,” said Karen.
“Generic restrictive covenants and practices may look good on paper threatening the world to end if someone poaches a client once they have left, but it needs to be clear and fit the business specifically.”
Restrictive covenants can stop the ex-employee touting, soliciting or securing potential or existing clients for a period of time, allowing the original business to re-cement their relationships.
Karen said: “Any restrictive covenant should be drafted to that specific business, seniority or influence of the employee, and the nature of the industry.
“Enforcing restrictive covenants and practices can be an expensive exercise. However, for certain businesses and situations, the cost of not enforcing it may be worse or financially more crippling because of the potential loss of business.”
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