Letter to ex-employee enforcing restrictive covenants

Where you believe a former employee is in breach of enforceable restrictive covenants, you may wish to consider taking legal action against them in the civil courts. The starting point is normally to write what’s known as a letter before action. Our letter to ex-employee enforcing restrictive covenants will help you.

A warning shot

Where you have good reason to believe a former employee is in breach of one or more of their restrictive covenants (such as non-solicitation of your clients), if you want to take action to protect your business interests, you should start by sending a letter threatening legal action against both the individual and their new employer. Your letter should set out what post-employment contractual provisions you believe the individual is in breach of and why (what investigations have you conducted and what evidence have you gathered?) and then go on to request an undertaking from the individual within seven days (or less) that they will not breach, or immediately cease any action which is in breach of, the terms of their restrictive covenants. Our Letter to Ex-Employee Enforcing Restrictive Covenants covers all these matters.

Legal action

Thereafter, if the employee does not respond or refuses to give an undertaking, it’s really up to you how far you want to take the matter. You can either accept the position as it is (particularly if very little damage to your business has been done or is likely to be done by the ex-employee); accept a reasonable lesser undertaking from the employee; seek mediation or consider legal action to enforce the restrictive covenants. Bear in mind that legal action is expensive, time-consuming and complex and you should preferably instruct a solicitor. Also, you need to be fairly certain your restrictive covenants are going to be enforceable, i.e. they are reasonably drafted to protect your legitimate business interests.

Remedies

If you go to court, what are your options? The primary remedy is an injunction to prevent the former employee from continuing to breach the covenants for the remaining duration of their term. You could also seek damages for any losses you can show you incurred as a result of the ex-employee’s breach of contract. However, these must be quantifiable and since it is often difficult to prove actual financial loss, any damages awarded may be nominal. Where the former employee was also a director owing fiduciary duties, you could try to seek an account of profits, i.e. a strict account of all profits the former employee/new employer has made due to the breach, regardless of any loss you have suffered. Finally, you could consider a claim for damages against the new employer for inducing a breach of contract or for interfering with your business by unlawful means. If you are considering a claim against the new employer, ensure you send a copy of the letter to them as well. We’ve drafted our letter as broadly as possible to cover all the various options.