Restraint of Trade Clause in a Contract of Employment

In Ireland, Restraint of Trade clauses in Contracts of Employment are generally void as against public policy unless they are deemed reasonable and necessary to protect an employer’s legitimate business interests, such as trade secrets, confidential information, or client connections. Enforceability depends on the scope being limited to what is strictly necessary in terms of geographical area, duration (typically 6-12 months), and the nature of the restricted activities. 

Key Aspects of Restraint of Trade in Ireland

• Presumption of Invalidity: Under Irish law, these clauses are prima facie void. The burden is on the employer to prove the restriction is reasonable between the parties and consistent with the public interest.
• Legitimate Interests: A clause cannot simply restrict competition. It must protect a specific, legitimate interest, such as:
  • Trade Secrets: Highly sensitive technical or business information.
  • Customer Connections/Goodwill: Protecting established relationships with clients or customers.
• Types of Restrictions:
  • Non-Compete: Prohibiting employment with a competitor.
  • Non-Solicitation: Preventing the solicitation of clients, customers, or employees.
  • Non-Dealing: Preventing business dealings with former clients, regardless of who approaches whom.
• Reasonableness Factors: Courts consider the employee’s seniority, the nature of the industry, the geographical scope, and the duration of the restriction. A 6–12 month duration is often considered reasonable, though this varies.
• Consequences of Unreasonable Clauses: If a clause is drafted too broadly, the court may find it unenforceable in its entirety, or in limited circumstances, apply the “blue pencil” rule to sever the unreasonable parts, provided the rest remains sensible. 

Conclusion:

Generally speaking, restrictive covenants are difficult to enforce in Ireland and they are generally deemed to be void as a restraint of trade.  A restrictive covenant will only be enforceable where the employer has a legitimate interest to protect (e.g. customers, goodwill, confidential information) and if the restriction is reasonable in terms of its intended duration, geographical scope and the scope of the product or service.  A covenant which is overly broad or unspecific may be deemed unenforceable.  In such circumstances, a court will not rewrite a clause but may deem it void in its entirety.  Restrictive covenants are typically enforced by way of an injunction. As an alternative or additional remedy, an employer may bring a claim for damages or a claim against the new employer for inducing a breach of contract.