Post Termination Restrictions in a Consultancy Agreement: What You Need to Know
When entering into a consultancy agreement, it is important for both the consultant and the company to be aware of the post termination restrictions that may be included in the contract. These restrictions are designed to protect the company’s interests by limiting the consultant’s ability to compete with the company after the termination of the agreement.
Here’s everything you need to know about post termination restrictions in a consultancy agreement.
What are Post Termination Restrictions?
Post termination restrictions, also known as restrictive covenants, are clauses that are included in a consultancy agreement to restrict the actions of the consultant after the termination of the agreement. These clauses can limit the consultant’s ability to:
– Work for a competitor of the company
– Solicit the company’s clients or customers
– Recruit the company’s employees
– Disclose confidential information about the company
Why are Post Termination Restrictions Included?
Post termination restrictions are included in consultancy agreements to protect the company’s interests. The company may have invested time and resources in building relationships with clients or developing confidential information, and post termination restrictions prevent the consultant from using this information for their own benefit or sharing it with a competitor.
Types of Post Termination Restrictions
There are different types of post termination restrictions that may be included in a consultancy agreement:
– Non-compete clause: This restricts the consultant from working for a competitor of the company for a set period of time after the termination of the agreement.
– Non-solicitation clause: This prevents the consultant from soliciting the company’s clients or customers for a set amount of time after the termination of the agreement.
– Non-dealing clause: This prevents the consultant from dealing with the company’s clients or customers, even if they approach the consultant first.
– Non-poaching clause: This restricts the consultant from recruiting the company’s employees for a set amount of time after the termination of the agreement.
– Confidentiality clause: This prevents the consultant from disclosing confidential information about the company, even after the termination of the agreement.
Are Post Termination Restrictions Enforceable?
Post termination restrictions are enforceable if they are reasonable and necessary to protect the company’s legitimate interests. Courts will consider the following factors when determining the reasonableness of a post termination restriction:
– The geographical area covered by the restriction
– The duration of the restriction
– The scope of activities restricted
– The importance of the information or relationships being protected
If a post termination restriction is found to be unreasonable, it may not be enforceable. However, if it is found to be reasonable, the consultant may be liable for damages if they breach the restriction.
Conclusion
Post termination restrictions in a consultancy agreement are designed to protect the company’s interests by limiting the consultant’s ability to compete with the company after the termination of the agreement. It is important for both the consultant and the company to understand these restrictions and ensure that they are reasonable and necessary to protect the company’s legitimate interests. If you are entering into a consultancy agreement, it is recommended that you seek legal advice to ensure that the post termination restrictions are enforceable and reasonable.