Non-compete clauses and garden leave in Ireland

"Are non compete clauses enforceable in ireland" is a question the courts answer one clause at a time. There is no statute setting a maximum period or a list of permitted restrictions. Instead, the common law doctrine of restraint of trade starts from the position that a clause stopping you earning your living is void, and puts the burden on the employer to show why this one should be enforced. This guide explains the test, the related clauses on non-solicitation and confidentiality, and garden leave, which is a different mechanism with different rules.

Restraint of trade: the starting point

A clause in your contract that restricts what you can do after you leave is a restraint of trade. The law's starting point is that such a clause is contrary to public policy and unenforceable, because people should be free to work and businesses should be free to compete. The employer can overcome that starting point only by showing two things:

1. A legitimate interest to protect. Trade secrets, genuinely confidential information, and the employer's connections with its customers and clients are the recognised interests. Simply not wanting a good employee to work for a competitor is not a legitimate interest. Neither is protecting the employer from ordinary competition.
2. The restriction goes no further than reasonably necessary to protect that interest, in three dimensions: how long it lasts, the geographical area it covers, and the activities it prohibits.

If the clause fails either test it is void in its entirety. Irish courts have been reluctant to rewrite an unreasonable clause into a reasonable one, though they will sometimes sever a clearly separable part. That means a clause drafted too widely often protects nothing at all, which is why well-advised employers draft narrowly.

The three dimensions

Duration. The question is how long the employer's interest needs protecting: how long before the confidential information goes stale, or before the customer relationships could be rebuilt by a replacement. Restrictions of 6 to 12 months have been upheld for senior employees with real customer relationships or genuinely secret knowledge. Longer periods are rarely enforced. Shorter periods are more likely to be upheld, and a 3-month restriction on a mid-level employee with some customer contact is the kind the courts have accepted. These are patterns from the reported cases and firm commentary, not fixed rules.

Area. The area must match where the employer actually competes and where you actually worked. A nationwide restriction on an employee who dealt only with customers in one county is wider than necessary. For a business trading online or across the EU, an area clause may be replaced by a customer-based one, which is often more defensible.

Scope. The activities prohibited must match what you did. A clause stopping a sales manager from "working in the industry in any capacity" prohibits far more than is needed to protect the customer connections the manager built, and a court may refuse to enforce it on that basis alone.

The seniority of your role runs through all three. The more access you had to confidential information and customers, the more the employer can justify. For junior staff, or for roles with no customer contact and no access to secrets, a non-compete of any length may fail the first test, because there is no interest to protect.

Non-solicitation and non-dealing clauses

A non-solicitation clause stops you approaching the employer's customers, or its staff, for a period after leaving. A non-dealing clause stops you doing business with those customers even if they approach you. Both are restraints of trade and both are subject to the same test, but they are more readily upheld than a full non-compete because they are narrower: they stop you taking specific relationships, not working at all.

The reasonableness questions are the same. A clause covering "any customer of the company" is wider than one covering "customers you dealt with in the last 12 months of your employment", and the second is far more likely to be enforced. A non-solicitation of staff clause has been upheld where it protects a stable workforce the employer invested in, but again only for a reasonable period.

Confidentiality

A confidentiality clause is different in kind. The duty not to misuse the employer's trade secrets and genuinely confidential information exists after employment ends even without a clause, and a written clause confirming it is enforceable without any time limit for genuine secrets. What the clause cannot do is prevent you using the general skill, knowledge and experience you gained in the job: that is yours, and a confidentiality clause drafted to catch it operates as a non-compete and is tested as one.

The practical dividing line is between a customer list, a pricing model or a formula, which the employer can protect, and the ability to sell, to code or to run a kitchen, which it cannot.

How a non-compete is enforced

Restrictive covenants are enforced in the courts, not the WRC. An employer that believes you are in breach can seek an injunction to stop you working for the competitor until the period ends, and can claim damages for loss caused. In practice the first step is almost always a letter from the employer's solicitor to you and often to the new employer. How to respond to that letter is a matter for advice, because the arguments turn on the clause's exact wording and on facts about the two businesses and your role, but the questions to ask are the ones above: what interest, what period, what area, what scope.

Two further points. An employer that has itself breached the contract in a fundamental way, for example by dismissing you without the notice the contract requires, may lose the right to enforce the restrictions, because it cannot both repudiate the contract and rely on it. And a restriction that was reasonable when signed does not become unreasonable because your role changed, though a role that shrank may undermine the interest the clause was written to protect.

Garden leave

Garden leave is a period during which you remain employed and are paid, but are instructed to stay away from work, not to contact customers, suppliers or colleagues, and not to work for anyone else. It is usually used to cover the notice period when you resign to join a competitor, so that by the time you start there your knowledge is stale and your customer relationships have been handed over.

Garden leave is not a restraint of trade in the same sense, because you are being paid throughout. But it needs a contractual basis. Without a garden leave clause, or your agreement at the time, the employer cannot stop you working out your notice in the ordinary way, and for some roles (where the employee has a right to work, for example to keep skills or a professional profile current) the courts have refused to allow garden leave to be imposed.

During garden leave:

• You are paid in full, including contractual benefits such as pension contributions, health insurance and a car allowance. Bonus and commission depend on the scheme rules.
• Annual leave accrues and the employer can require you to take it during the period, with the usual consultation.
• Your service continues, which matters for notice bands, redundancy pay and the 12-month unfair dismissal threshold.
• You remain bound by your duties as an employee, including loyalty and confidentiality. Starting with the new employer, even informally, during garden leave is a breach.
• The employer can usually call you back to work or to hand over, if the clause allows.

The length of garden leave is the length of your notice period, which is why the notice clause and the garden leave clause are read together. The notice calculator works out the statutory minimum and shows how a longer contractual period sits on top of it; the employer's bands run from 1 week to 8 weeks depending on service, and a contract can lengthen that but never shorten it. Resigning, notice and references covers the resignation side.

A court asked to enforce a non-compete after a period of garden leave will usually set the two off against each other: the time you spent on garden leave is time the employer's interest was already protected, and the non-compete period that follows may be cut down or not enforced at all. Many contracts say this expressly.

Garden leave and redundancy

"Garden leave redundancy" is a common search because employers sometimes place staff on garden leave for the notice period of a redundancy, particularly where the role involves clients or confidential projects. The rules do not change:

• Your statutory redundancy payment is worked out on your continuous service and your normal weekly pay, capped at €600 a week, at 2 weeks' pay per year plus a bonus week. Garden leave counts as service and your pay during it is your normal pay. The redundancy calculator does the sum.
• You are owed the full notice period, worked or on garden leave, or pay in lieu. The notice bands are in the Minimum Notice and Terms of Employment Acts 1973 to 2005.
• Annual leave accrued and not taken is paid with the final pay.
• The redundancy still has to be genuine and the selection fair; garden leave does not change that. See redundancy in Ireland.

If you are offered an ex gratia sum on top of the statutory payment in return for signing a settlement agreement that includes new restrictions, those restrictions are a term of the deal and the usual advice applies: read settlement agreements before signing.

Before you sign a new contract

Restrictive covenants are negotiated most effectively before you start, not when you leave. Ask what interest the clause protects, whether the period and area match your role, whether a non-solicitation clause would serve the employer's purpose instead of a non-compete, and whether the clause will be set off against any garden leave. An employer that cannot answer those questions is drafting from a template, and a template clause is the kind most often found unenforceable later.

Where this leaves you

A non-compete binds you only if the employer can show a real interest and a restriction that is no wider than needed to protect it, and that question is decided in court, not the WRC. Garden leave is different: it needs a clause, it runs for your notice period, and you are paid in full throughout. Start with the notice calculator to see how long your notice is, because that is the period a garden leave clause runs on and the period any non-compete is measured against. If a solicitor's letter arrives, the clause's own wording and the three dimensions above are what any advice will turn on. The glossary explains the terms used here.