A restrictive covenant and compromise agreements is an agreement that is aimed at protecting the interests of the employer. It includes protection of confidential information and trade secrets especially after an employee departs from an employment. In general, restrictive covenants are drafted to block any employee from transferring to competition, using sensitive information against the employer, and soliciting or poaching customers and clients. An employee may sign such covenant as part of his pre-employment contract or as an added provision in a compromise agreement upon his resignation or employment termination.
Employers prefer to use restrictive covenants to continuously protect the company’s confidential information and trade secrets. The idea is that employees have the potential to use any important information against the employer especially after such employees decide to transfer to a competing business after termination of employment. These covenants are also used by companies against poaching of executives and employees by competitors. Any business also likes to maintain trade connections to its self and that could only be possible by making employees sign restrictive covenants.
When an employee is asked to sign an agreement with the employer, any existing restrictive covenant between the employee and the employer still applies. That means that even if there is no specific provision or statement about the restrictive covenant in the compromise agreement, it is assumed that the employee agrees that he/she would continuously honor such agreement. For instance, such a covenant usually prevents any employee from working in any of the employer’s competitors for at least six months after employment departure. After the termination of the employment and a possible signing of a compromise agreement, the employee is still obliged to honor the employment restrictive agreement.
If you think the restrictive covenant would not do well for you and would only lead to difficulty in finding and getting an alternative employment in the future, you have the right to ask the employer to release you from the restrictive covenant. Of course, the employer would hesitate to give in to your request. But you could always use the compromise agreement to do so. You could tell your employer that you would not sign the compromise agreement unless you are released from the employment restrictive covenant. Usually, employers find it more important for employees to sign compromise agreements, though in some cases, there could be no other viable option but to keep a restrictive covenant effective.
If the employer, however, asks you to sign into a new and modified agreement as part of the compromise agreement offered, it is just appropriate for you to demand for an additional payment for agreeing to the restriction. The payment must be separately mentioned in the document because it is taxable. Otherwise, the entire termination payment you would receive may be taxable even if the amount falls less than £30,000. Thus, it would be helpful if you would be properly guided and advised by an independent and reliable employment solicitor before signing and entering into any compromise agreement with your employer.