Restrictive Covenants in care home employment contracts: what do you need to know as a carehome owner?

It is absolutely vital for care home owners to identify and secure experienced and talented employees in key management positions to ensure their homes are operated successfully and safely.

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Restrictive Covenants in care home employment contracts: what do you need to know as a carehome owner?

Whilst it may seem counter-intuitive to consider an employee’s departure at the very start of their employment, it is important to consider whether particular restrictive covenants should be included within employment contracts to safeguard the business should that employee leave in the future.

When taking steps to include (and subsequently enforce) restrictive covenants within an employment contract you need to consider several key factors so that those restrictions don’t represent restraint of trade.

A contractual term that restricts activities after employment has been terminated will be classed as void for being a restraint of trade, unless the employer is able to demonstrate that the restriction is reasonable and protects their legitimate business interests. Rulings on restrictive covenants are inherently difficult to predict as each case largely varies on the facts but there are certain factors that will give you a good idea of whether the restriction in question will be enforceable:

  • Restrictive covenants in employment contracts are usually viewed more strictly than they would be in a freely negotiated commercial agreement.
  • The restrictive covenants must be reasonable in respect of a range of commercial factors including duration, geography and whether the restriction is industry specific or covers numerous industries.
  • The restrictive covenants must relate to a legitimate business interest and protect a legitimate propriety interest such as confidential information, protecting of workforce or safeguarding connections with residents etc. Can a restriction be justified?
  • Restrictions cannot be added solely to prevent competition.

It is important to consider which restrictive covenants will be required for particular employees and of course an individual who is acting in a management role and/or has access to sensitive/commercial information is likely to warrant stricter restrictions than a more junior employee.

It is also often the case that over a period of time an employee may work their way up into a more senior position and it is therefore important to monitor whether restrictions should be amended to reflect this periodically.

Although it is obviously beneficial to ensure restrictive covenants are enforceable and are updated regularly, disputes can still arise when a key employee leaves a care home business. If that happens to you, we can help.  We have enormous experience in dealing with disputes arising from restrictive covenants on behalf of both care home owners and their employees.

For further information about the use and enforcement of restrictive covenants please contact Andrew Broadbent on 0114 2521416 or andrew.broadbent@keebles.com.

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