Restrictive covenants

In short. A restriction is not enforced simply because you signed it. Maltese courts ask whether it protects a legitimate interest of the employer and is reasonable in its length, area and scope. Testing that after you have left is slow and uncertain, so the better course is usually to agree a release, a narrower restriction or a payment for it in the exit terms.

The usual terms

• Non-compete: you may not work for, or set up, a competing business for a period after you leave.
• Non-solicitation: you may not approach the employer's clients or staff to take them with you.
• Non-dealing: you may not deal with certain clients at all, even if they approach you.
• Confidentiality: you may not use or disclose the employer's confidential information. This duty does not end with the employment.

They may sit in your contract, a side letter, the plan rules of an incentive scheme or a shareholders' agreement, and an exit agreement may restate or extend them.

In practice. Covenants are often copied from a group template, written for another country's law and another role. Read each one against what you actually did and whom you actually dealt with.

How far they reach

The questions a court is likely to ask are practical ones. Does the restriction protect something real, such as client connections or confidential information, rather than simply keeping a competitor short of talent? Is its length proportionate to how long that information stays useful? Is the area, and the list of competitors, limited to where you actually worked? A broad or long restriction may not be enforced at all.

In practice. Uncertainty cuts both ways. You may doubt that a covenant would be enforced, but a new employer may not want to take the risk of an injunction. That is why a clear release, or an agreed narrower restriction, is worth negotiating even when the covenant looks weak.

Garden leave and the covenant together

If your contract has both a garden leave clause and a post-employment non-compete, the employer may try to apply them one after the other: months at home, then months out of the market. The total time you are kept away from your sector is part of whether the restriction is reasonable.

In practice. Settle it in the exit terms: garden leave counts against the non-compete, or the non-compete is shortened or released. See notice and exit terms.

Duties beyond the contract

A covenant is not the only limit. While you are employed, including on garden leave, you owe your employer fidelity, and a senior person entrusted with a business opportunity may owe duties about it that survive the resignation. In Associated Supplies v Mizzi, a senior manager who took on, through his own company, a project he had worked on for his employer was ordered to return the benefits received, on a basis that did not depend on his non-compete clause.

In practice. If you are leaving with knowledge of live tenders or negotiations, the exit terms may need to deal with those specific opportunities, rather than rely on a general release or a standard covenant.

What to negotiate

• a release of the non-compete, or a shorter period and a narrower definition of competitor;
• garden leave set against any restricted period;
• a named list of clients or projects, in place of a general restriction;
• confirmation that a specific new role does not breach the covenants;
• confidentiality terms that leave you free to make disclosures the law protects or requires;
• mutual non-disparagement, binding the company's directors and senior staff as well as the company.

Where it goes wrong

• accepting a new role before the covenant position is clear;
• an exit agreement that quietly restates or extends the covenants;
• taking documents, client lists or contacts on the way out;
• assuming a weak covenant will not be enforced, and finding the new employer will not take the risk.