Can I negotiate restrictive covenants in my settlement agreement?

Key Takeaways

1. Yes, you can negotiate restrictive covenants in your settlement agreement before signing to limit their impact on future employment and business opportunities.
2. Restrictive covenants such as non-compete or non-solicitation clauses are not set in stone and can often be narrowed, removed or clarified through negotiation.
3. Our solicitors can advise on the enforceability of restrictive covenants, help negotiate fairer terms and seek higher ex gratia payments as part of your exit package.
4. Accepting overly broad post-termination restrictions without advice can affect your ability to work or start a business, so getting independent legal advice is essential.
5. Employers usually pay all legal fees for independent legal advice on settlement agreements, meaning our service is generally free to you.
6. Our SRA regulated solicitors offer same-day remote appointments across the UK and have helped over 1,400 employees resolve settlement agreement restrictive covenants.
7. The cost of signing restrictive covenants without negotiation or advice is permanent: you may lose your right to challenge them or negotiate better terms later.
8. Book a confidential appointment before signing so our solicitors can ensure your settlement agreement meets your needs and protects your future career.

Can I Negotiate Restrictive Covenants in My Settlement Agreement?

Yes, you can negotiate restrictive covenants in your settlement agreement before signing. Restrictive covenants such as non-compete and non-solicitation clauses are not fixed in stone—they can often be limited, clarified, or even removed by agreement with your employer. In England and Wales, independent legal advice is legally required for your settlement agreement to be binding, and your employer will usually pay for this service so it is generally free to you.

If you are facing redundancy or have been offered a settlement agreement, it is essential to review any restrictive covenants carefully because they can affect your ability to work elsewhere or start a business after your employment ends. Our solicitors can advise on whether the restrictions are reasonable, help you negotiate fairer terms or a higher exit payment, and make sure you understand the risks before you sign away any rights.

Can I Negotiate Restrictive Covenants in My Settlement Agreement?

You absolutely can negotiate restrictive covenants in your settlement agreement. It is both common and sensible to review, challenge, and adjust these clauses before signing. Employers frequently propose new, amended, or broader post-termination restrictions, but their inclusion and terms are not set in stone—every detail is open to consultation and modification during exit discussions.

Settlement agreements are bespoke legal contracts resolving your employment relationship. Restrictive covenants included may go beyond your original contract, affecting what you can do after your employment ends, including where you can work, for whom, and for how long. Employers aim to protect their business interests, but these clauses must be reasonable and necessary. Our solicitors will help you identify which clauses may be challenged or altered for your circumstances.

What Are Restrictive Covenants in Settlement Agreements?

Restrictive covenants are clauses designed to protect an employer’s legitimate business interests after you leave. In settlement agreements, they may repeat or extend existing contract terms, but often appear as new provisions specific to your exit. Common forms prevent competition, poaching staff or clients, or using confidential information post-employment.

Typically, covenant terms specify a period (commonly 3–12 months) and a geographical area. Clauses can also be tailored to your role, sector, or access to sensitive data. The negotiation process—guided by a solicitor—ensures these clauses are fair and proportionate.

Common Types of Post-Termination Restrictions

• Non-Compete: Restricts joining or starting a competing business for a defined period.
• Non-Solicitation: Stops you from approaching former clients or colleagues.
• Non-Dealing: Prevents you from accepting work from the employer’s clients, even if they approach you.
• Non-Poaching: Bans recruiting ex-colleagues.
• Confidentiality: Requires you to keep employer information confidential.

These clauses are enforceable only if reasonable and necessary to protect genuine commercial interests.

Why Employers Include Restrictive Covenants in Settlement Agreements

Employers include these clauses to protect client relationships, confidential information, and workforce stability, especially when senior, sales, or technical staff leave. Securing comprehensive post-employment restrictions is often a key part of a financial settlement or redundancy process.

Are Restrictive Covenants Negotiable Before Signing?

Yes—restrictive covenants in settlement agreements are fully negotiable before you sign. Employees are not obliged to accept restrictions that are broader or longer than necessary, and it’s normal to push back on unfair or excessive terms. Our solicitors review both your current contract and the proposed agreement, ensuring that you challenge or refine any restriction that goes beyond standard, reasonable limits.

Employers might characterise their proposals as “company policy,” but every aspect can be adjusted or removed. Always insist on clarity and fairness, addressing terms like duration, geography, and specific activities covered.

Which Terms Can Be Narrowed, Removed, or Clarified?

You can negotiate all aspects of restrictive covenants: reduce durations, limit which competitors or clients are covered, or restrict geographical reach. In many cases, you can also seek to have outdated contractual restrictions formally released.

Comparison Table: Contractual vs. Settlement Agreement Covenants

Strategies for Restrictive Covenant Negotiation

Effective negotiation means providing the full picture: all employment contracts, offer letters, and correspondence. Our solicitors evaluate the justification for each restriction and propose alternate terms where appropriate. You can use evidence of your future role or sector to persuade the employer to agree only to what is necessary.

Is Independent Legal Advice Required for Settlement Agreement Restrictive Covenants?

Yes, you must receive independent legal advice for a settlement agreement to be valid, as set out by section 203 Employment Rights Act 1996. This includes advice on all post-termination restrictions. Our solicitors will clearly explain every restriction, its legal impact, and your options for negotiation.

Employers must pay for this legal advice. Your solicitor’s certificate is essential—without it, the agreement (and covenants within it) may not be legally binding.

Legal Framework: Section 203 Employment Rights Act 1996

This law requires you to obtain advice from an independent solicitor (or authorised adviser) before a settlement agreement is valid. The solicitor must confirm you have been fully informed about all rights and obligations—including any restrictive covenants.

Why ILA Is Essential for Enforceability and Protection

Without genuine independent legal advice, restrictive covenants added or amended in a settlement agreement may not be enforceable in court. Solicitor advice ensures you understand the real-world impact of each clause and only sign terms that are clear and fair.

If you are uncertain about any clause, particularly restrictive covenants, our solicitors will provide a full review and practical solutions. Call on 0800 054 1144 or book your settlement agreement advice online for a same-day appointment.

How Restrictive Covenants Affect Your Future Employment and Prospects

Restrictive covenants can have a serious impact on your ability to get another job or start a business. Overly broad restrictions can delay your career move, limit your options, or affect your income after departure. The financial and practical consequences can be severe if you sign without understanding the scope and enforceability of these terms.

Senior, sales, or specialised roles are most at risk, but any employee can be affected. Identifying issues early with solicitor help is vital.

Risks of Broad or Unreasonable Clauses

A restrictive covenant that is too wide in time, geography, or activity might not be enforceable in law, but employers often draft terms more widely than needed. The main legal test is “reasonableness”—does the clause fairly protect real business interests? See ACAS guidance on restrictive covenants for more detail.

Practical Consequences for Career Moves, Self-Employment, and Redundancy

Whether you plan to change employer, set up on your own, or work as a consultant, restrictive covenants apply unless removed. Breaching a covenant can result in an injunction, damages claims, or withheld compensation.

Can Restrictive Covenants Be Removed or Limited for a Better Exit Package?

Employers often value restrictive covenants as part of the overall exit deal—agreeing to certain restrictions can be traded for a higher payment, improved reference, or the removal of other obligations. If you demonstrate that a clause is excessive for your role or sector, you may achieve better terms without financial cost.

Negotiation is standard and our solicitors can guide you to use restrictive covenants as leverage to improve your deal.

Linking Restrictive Covenants to Enhanced Financial Settlement

Employers interested in securing enforceable covenants will often pay for reasonable restrictions. You may be able to negotiate increased compensation or a formal release from older, more extensive clauses in exchange for agreeing to limited new terms.

Examples of Negotiated Outcomes and Leverage Points

Employees have secured improvements by referencing the threat of tribunal claims such as unfair dismissal, constructive dismissal, or discrimination.

Tax Considerations: Are Payments for Accepting Restrictive Covenants Taxed?

Yes—payments for agreeing to restrictive covenants are almost always treated as taxable earnings by HMRC. This differs from other aspects of settlement agreements, where some compensation may qualify for the £30,000 exemption.

Payments specifically for restrictive covenants must be taxed through PAYE and are subject to both income tax and National Insurance contributions. Only genuine compensation for loss of employment—not for restrictions post-employment—can benefit from the tax exemption.

£30,000 Tax-Free Exemption and Post-Termination Restrictions

For most termination payments, the first £30,000 may be tax-free (see HMRC guidance on termination payments). Payments to secure your acceptance of restrictive covenants, however, do not qualify.

How PENP, Notice, and Restrictive Covenant Payments Are Treated by HMRC

Payments in lieu of notice (PENP) and restrictive covenant payments are both taxed through PAYE. Your settlement agreement should always clearly break down each sum and identify its tax treatment to avoid future HMRC issues.

Key Clauses and Issues to Review Before Signing

You should never sign a settlement agreement without checking every clause, particularly restrictive covenants, confidentiality, references, tax, and indemnities. Look for any indirect restrictions (“any connection with a competitor”), overbroad obligations, and ambiguous or undefined terms.

Our solicitors will review and explain any problematic clause while negotiating amendments to protect your interests.

Non-Compete, Non-Solicitation, Confidentiality, References, and Indemnities

Check all restrictive covenants are relevant and proportionate for your role and industry. Confidentiality clauses should not limit future job-seeking. Reference wording must be included if agreed. Beware indemnity clauses that shift future tax or enforcement risks onto you.

Practical Risks of Accepting Standard Terms Without Negotiation

Standard template agreements may include excessive terms that hurt your career or expose you to unnecessary risk. Always insist on a tailored agreement that fits your role and circumstances.

If you need a solicitor to review or negotiate restrictive covenants, call 0800 054 1144 or book your settlement agreement advice online. Our fees are paid by your employer, so you pay nothing for expert legal advice.

Step-by-Step: The Settlement Agreement Review and Signing Process

The settlement agreement process is a structured exchange involving you, your employer, and your solicitor. Typically, you will:

1. Receive a draft agreement from your employer.
2. Instruct our solicitors and provide all relevant documentation.
3. Our solicitor reviews your documents and highlights negotiating points.
4. We submit proposed changes to the employer.
5. Once terms are agreed, the final version is produced.
6. Our solicitor gives independent legal advice, you sign, and we issue your ILA certificate.
7. Employer pays settlement sum and legal fees.

Remote appointments and digital signing ensure efficient turnaround, even for urgent or nationwide cases.

Typical Timeline and Employer-Funded Legal Advice

Settlement agreements are normally reviewed, negotiated, and completed within 3–7 working days. Your employer pays our legal fees—reflecting the statutory requirement for independent legal advice (section 203 ERA 1996). No cost falls on the employee.

How Remote, Same-Day Legal Advice Works in Practice

Our solicitor team provides remote settlements review through video or phone at a time to suit you. All documents are handled securely online, meaning location or short notice is never a barrier to prompt, thorough legal advice and valid ILA certification.

Why Choose Settlement Agreement Lawyers?

By choosing our solicitors, you ensure all restrictive covenants and settlement terms are covered by specialist, SRA-regulated expertise. Benefits include:

• No cost to you—your employer pays our capped fee.
• Same-day, nationwide remote appointments.
• SRA-regulated solicitors guaranteeing compliance and confidentiality.
• Proven success in negotiation and maximising settlement outcomes.
• Clear, plain English advice and practical drafting assistance.

Our Service Is Free to You: Employer Pays

As a matter of English law and common practice, your employer covers all costs for your independent legal advice and settlement agreement review. See more about funding arrangements.

Fees Capped at Employer’s Contribution, No Hidden Costs

You pay nothing—our fee is capped to your employer’s standard contribution, even for complex negotiation.

Same-Day, Nationwide Remote Appointments

Use our online booking service for instant access to expert settlement agreement lawyers nationwide, with flexible appointment scheduling.

SRA Regulated Specialist Solicitors

All advice is from SRA-authorised solicitors, ensuring professional, insured service and strict adherence to English law.

Expert Negotiators for Restrictive Covenants and Exit Terms

Our experienced team covers all angles, including redundancy, discrimination, and protected disclosures.

Frequently Asked Questions About Negotiating Restrictive Covenants in Settlement Agreements

What types of restrictive covenants are usually included in a settlement agreement?

The main restrictive covenants are non-compete, non-solicitation, non-dealing, non-poaching, and confidentiality clauses. Each is designed to protect the employer’s business and will vary according to your role and sector.

Can my employer add new restrictive covenants when offering a settlement agreement?

Yes, employers can propose new or more extensive restrictive covenants as part of a settlement agreement, even if these were not in your original contract. All new terms are fully negotiable before signing.

How can I negotiate the scope or length of a non-compete clause?

You can negotiate a shorter period, a narrower geographical area, or the application limited to specific competitors or roles. Sector norms and evidence of your intentions help support negotiation, often best handled with solicitor input.

What if my employer refuses to change or remove restrictive covenants?

If your employer refuses to amend unfair restrictions, you are not obliged to sign the agreement. In many cases, the prospect of losing a deal or facing a potential tribunal claim prompts further negotiation.

Are restrictive covenants in settlement agreements always enforceable?

No, a restrictive covenant is only enforceable if it is reasonable and protects a legitimate business interest. Overbroad or unclear clauses can be challenged. Receiving solicitor advice before signing is the best way to avoid enforceability problems.

Do I need a solicitor to understand and negotiate restrictive covenants?

Yes, legal advice is essential. Independent legal advice is a statutory requirement for the agreement to be valid. Our solicitors can identify problematic clauses, negotiate better terms, and protect your post-employment rights.

Will accepting restrictive covenants impact my redundancy payment or career options?

Strictly, covenants do not reduce statutory redundancy pay, but you may be able to use them to negotiate higher ex gratia sums. Overly broad restrictions can significantly limit your career, so always seek solicitor advice first.

Is legal advice for a settlement agreement free for employees?

Yes. Your employer pays the fees for independent legal advice, so there should be no personal cost for employees to secure solicitor support and a valid ILA certificate.