Key Takeaways
- You can negotiate restrictive covenants in your settlement agreement, such as requesting limits or removal of non-compete, non-solicitation, and confidentiality clauses.
- Employers often propose stricter restrictive covenants in settlement agreements than in your original contract, but these are fully negotiable before signing.
- Our solicitors regularly help employees minimise or remove post-termination restrictions, protecting your future employment prospects.
- Settlement agreement restrictive covenants must be reasonable in duration and scope, and only enforceable if they protect legitimate business interests under UK law.
- You are not required to accept new or broadened restrictions just to receive a settlement offer—clauses should always be reviewed before you sign.
- Negotiating restrictive covenants may affect your settlement’s financial and tax position if any payment is linked to the new restrictions.
- Employers usually pay for your independent legal advice, so our negotiation and review service is free for you.
- Our solicitors are SRA regulated, with same-day remote advice and a track record of protecting employee rights.
Can I Negotiate Restrictive Covenants in My Settlement Agreement?
Yes, you can negotiate restrictive covenants in your settlement agreement, including asking for these clauses to be reduced, tailored, or removed altogether before you sign. Employers may propose stricter restrictions than your contract, but you are under no obligation to accept them as a condition of settlement. Negotiating these terms is your legal right and one of the main reasons to seek our solicitors’ help before signing.
If you have received a settlement agreement—whether due to redundancy, workplace dispute, or mutual decision to part ways—legal advice is mandatory under UK law. Your employer nearly always covers this cost, meaning input from our solicitor on the settlement agreement restrictive covenants, overall fairness, and tax position costs you nothing directly.
This guide explains how our solicitors help you review and negotiate post-termination restrictions, what makes a covenant enforceable, your options for reducing or removing limits on future roles, and the effect these negotiations have on your financial outcome. For direct support, call 0207 459 4037 or book now for immediate legal advice.
Can I Negotiate Restrictive Covenants in My Settlement Agreement?
Yes, you absolutely can negotiate restrictive covenants in your settlement agreement. In England and Wales, clauses such as non-compete, non-solicitation, and confidentiality are not fixed demands from your employer—they are open to discussion and amendment before the agreement is finalised and signed. You have the legal right to request less restrictive wording, time limits, or the removal of entire clauses, depending on what is fair for your particular role and exit.
Employers often use standard or overly broad restrictions to protect their business, but these should always match your actual duties and the nature of your departure. With specialist legal advice, we regularly limit, clarify, or remove excessive covenants so you can move on with your career with maximum flexibility.
In a recent redundancy, our solicitors reduced a 12-month national non-compete clause to a six-month restriction covering only the client’s city of work—enabling an immediate move to a new employer outside that area.
What Are Restrictive Covenants in a Settlement Agreement?
Restrictive covenants are post-termination obligations that limit what you can do, or who you can work for, after leaving your job. Typical settlement agreement restrictive covenants include:
- Non-compete: Prevents work for competitors for a defined time and region.
- Non-solicitation: Stops you approaching old clients or staff for business.
- Non-dealing: Bars you from doing business with your former contacts, even if they reach out to you.
- Confidentiality: Obligates you to protect business secrets or sensitive information.
These restrictions may repeat, modify, or expand what was in your employment contract, and become legally binding once you’ve signed your settlement agreement. They can meaningfully impact your job search afterwards.
Always compare the draft settlement restrictive covenants against your contract. If they are tougher, or new, our solicitors can help insist on fair and proportionate terms.
You can read more about settlement agreement advice and the specifics of redundancy settlement agreements on our site for added detail.
Is Independent Legal Advice Mandatory for Negotiating Restrictive Covenants?
Independent legal advice (ILA) is mandatory before any settlement agreement—including restrictive covenants—becomes valid (see section 203 of the Employment Rights Act 1996). A qualified, independent solicitor must explain the terms, risks, and enforceability of all restrictions, and only after receiving this advice—and formally signing—does your agreement take effect.
Employers nearly always pay for your ILA, so getting our solicitor’s detailed review and ILA certificate is free for you. We make sure you understand the practical and legal consequences of any clause, and can advise pausing the advice process if you want to negotiate better terms.
A client consulted us after being offered a settlement with new non-solicitation terms. Our solicitor stopped the ILA process, negotiated much shorter restrictions, and secured a written clarification, greatly reducing the client’s risk.
Find out more about funding for your legal advice and unfair dismissal settlements if you’re unsure about your rights or costs.
How and When Can Settlement Agreement Restrictive Covenants Be Negotiated?
Restrictive covenants should be negotiated before anything is signed or made final. Typically, negotiation happens once your employer has provided a draft settlement agreement, but before you provide your agreement and our solicitor issues your ILA certificate. This is the stage where you have real leverage to push for fairer terms and clarifications.
The reason for your exit—whether redundancy, performance, or dispute—affects what is reasonable to include. Employers may attempt to use boilerplate, wide-ranging clauses regardless of the facts. Our solicitors will challenge unnecessarily strict restrictions and can propose alternative wording, reduced lengths, or deletion where appropriate.
It is standard practice to ask HR for a short delay to get legal advice and negotiate unfair post-termination restrictions. Asking for fairer clauses will not usually put your deal at risk. Let our solicitors handle these discussions to avoid stress and get the most workable outcome.
For more context on frequently-negotiated issues, see our pages on constructive dismissal and performance, capability & disciplinary exits, both of which have nuances around covenants.
What Makes a Restrictive Covenant Enforceable or Reasonable?
To be enforceable in England and Wales, a restrictive covenant must go only as far as is reasonably necessary to protect legitimate business interests. Typically, this means:
- No longer than required (usually 6–12 months)
- Geographically limited (aligned to where you actually worked)
- Targeted to genuine risk (for example, access to confidential material or clients)
- Justified by the nature of the business
Courts will not uphold restrictions that are too broad or prevent you from working altogether. The focus is always on protecting legitimate interests only—such as goodwill, confidential information, or client relationships.
A client with a regional sales role was offered a nationwide, one-year non-compete. Our solicitors cut the area to just their sales region and the duration to six months, matching what courts would recognise as reasonable.
Further information can be found via ACAS guidance on settlement agreements and the Equality Act 2010 for discrimination-related exits.
Can I Remove or Reduce a Non-Compete Clause in My Settlement Agreement?
Yes, you can propose to remove or reduce a non-compete clause before signing. Employers have discretion but often agree to reduce restrictions that are disproportionate to your role and actual risk. Our solicitors routinely negotiate shorter timeframes, narrower geographic areas, or the deletion of non-competes when not justified.
- Duration might be reduced (e.g. from 12 to 6 months)
- Geographic scope can be localised
- Activities can be narrowed to genuine competitors
- Entire clauses can sometimes be deleted by negotiation
Never agree a non-compete just to “get things done”—make sure it will not prevent you from accepting your next desirable job. Our solicitors use their negotiation experience to secure the best possible freedom for your next career steps.
If you need advice on whether your situation offers cause to negotiate (or remove) a non-compete, call our solicitors at 0207 459 4037 or book a no-obligation video appointment.
What Happens to Restrictive Covenants in Redundancy Settlement Agreements?
In genuine redundancy scenarios, restrictive covenants are generally harder for employers to justify, given you are not leaving for misconduct or competitive reasons. Many employers use standard clauses, but these are fully negotiable—your departure is business-driven, so broad restrictions are rarely reasonable.
You may be able to negotiate the deletion or significant reduction of post-termination restrictions. Coveted client lists or confidential knowledge may warrant some limits, but one-size-fits-all clauses are seldom enforceable following redundancy.
Our solicitors helped a group redundancy client have all non-compete and non-solicit terms deleted, as there was no ongoing business threat—maximising both re-employment prospects and take-home pay.
Here, you can also check your potential redundancy compensation using our calculator.
How Do Restrictive Covenants Affect the Financial Value and Tax Position of My Settlement Agreement?
If you receive a specific payment to accept new or strengthened restrictive covenants, that amount is always taxable as employment income—and does not qualify for the £30,000 tax exemption available for certain ex gratia payments (see gov.uk tax on termination payments guidance). It’s essential to understand what each part of your offer is actually for to avoid surprises on deductions.
| Payment Type | Tax-Free Up to £30,000 | Fully Taxable |
|---|---|---|
| Genuine ex gratia payment | Yes | Above £30,000 |
| Covenant consideration | No | Yes |
| PILON (PENP) | No | Yes |
| Holiday pay | No | Yes |
Our solicitors ensure payment breakdowns are clearly stated and can advise negotiating more tax-efficient alternatives where possible.
Extra payments for new restrictive covenants are always subject to tax. Maximise your net settlement by understanding and negotiating these payments with clarity. Try multiple offer breakdowns using our Settlement Agreement Calculator.
Step-by-Step: The Settlement Agreement Signing and Negotiation Process
The process for negotiating and signing a settlement agreement with restrictive covenants usually follows these simple steps:
- Employer presents a draft agreement—often with restrictive covenants.
- You review the documents and contact our solicitors.
- Our solicitors examine every clause and identify excessive or unusual restrictions.
- We propose changes or deletions to your employer in writing.
- The employer responds—accepting, amending, or rejecting your requests.
- Once terms are agreed, our solicitor provides your ILA certificate after a final review and explanation.
- You sign the agreed final settlement agreement.
Negotiations are most effective before you sign or commit to any terms. Our experience helps identify negotiation points and win better results on your behalf.
One client avoided a sweeping non-poaching term by having our solicitors limit the clause to just five named individuals, enabling a smooth industry transition.
Let our solicitors manage settlement negotiations for you—call 0207 459 4037 or book a remote review and advice session with zero direct cost to you.
Key Clauses and Common Risks: What Else Should You Watch For?
Settlement agreements often contain a wide mix of clauses and risks, not just restrictive covenants. Watch for:
- Confidentiality and non-disparagement wording (clarify what’s mutual)
- Reference provisions (push for factual or agreed references)
- Waiver clauses (only give up rights you know about)
- Tax indemnities (understand your liability if HMRC challenges the deal)
- Return of property confirmations (check before you sign)
- Finality of claims (ensure all current workplace issues, like harassment or workplace grievances, are settled)
Our solicitors highlight and negotiate these topics every day, ensuring you do not inadvertently sign away more than you intend.
Signing a settlement agreement without advice on every clause—especially post-termination restrictions—can have serious, enforceable consequences. Always have our solicitors review the documents before you commit.
Why Choose Settlement Agreement Lawyers?
Our solicitors are SRA-regulated specialists exclusively focused on settlement agreements and employee advice for England and Wales. Whether you are facing redundancy, disciplinary exit, discrimination, or whistleblowing claims, we know exactly how to scrutinise, negotiate, and improve restrictive covenants and related clauses to maximise your next options.
Appointments are quick, remote, and fully employer-funded. Our only duty is to protect your interests—and we handle your case with the urgency it deserves. Check our client success stories for examples of how we’ve secured fairer deals and future freedom for clients across every sector.
A client in a specialist role faced a two-year non-compete. Our solicitors’ industry knowledge and negotiation skills secured a drastic reduction and a positive reference, enabling a smooth transition to a preferred employer.
Frequently Asked Questions
Can I refuse to sign a settlement agreement with restrictive covenants I don’t agree with?
Yes, you are always free to refuse a settlement agreement if you object to its restrictive covenants. No agreement is valid without your signature, so you can reject unfair or unworkable terms and retain your statutory rights if needed.
How can I ask my employer to reduce or remove post-termination restrictions?
You can request reductions or removals directly in writing or through your solicitor. Explain why proposed clauses go beyond necessity for your role or risk. Employers are often open to reasonable negotiation, especially when guided by a solicitor’s input.
Are settlement agreement restrictive covenants more enforceable than those in my contract?
Settlement agreement restrictive covenants may be drafted to be more enforceable because they are negotiated and acknowledged after independent legal advice. However, courts still only uphold clauses that are reasonable and genuinely protect legitimate business interests.
Will agreeing new restrictive covenants change the tax treatment of my settlement agreement?
Yes, any payment linked specifically to agreeing restrictive covenants is fully taxable as income, rather than eligible for the normal £30,000 tax exemption for ex gratia elements. Always check the payment breakdown in your agreement to understand the real net value.
What happens if my employer insists on tougher non-compete clauses?
If your employer insists on stricter non-competes, you can negotiate, refuse, or request extra compensation for the limitation. Employers sometimes stand firm, but rarely can impose terms without your agreement and informed legal advice.
What are legitimate business interests for a post-termination restriction to be valid?
Legitimate business interests include confidential information, customer connections, goodwill, or trade secrets. Clauses covering wider areas—such as preventing employment in an entire sector—are generally unenforceable and open to legal challenge.
Is a solicitor’s advice really mandatory for reviewing or negotiating restrictive covenants?
Yes, independent legal advice from a qualified solicitor is mandatory for all settlement agreements in England and Wales, covering every post-termination restriction. This ensures you know your rights and can get unfair covenants amended before signing.
What if I breach restrictive covenants after signing a settlement agreement?
If you breach covenants after signing, your former employer may seek an injunction or damages, or reclaim settlement payments. Whether this happens depends on the specific clause and circumstances—take legal advice immediately if a dispute arises.
Negotiating restrictive covenants in your settlement agreement is not only your right but your best means to protect your career and financial future. Employers frequently propose wider or stricter terms than are strictly justified, impacting your future work and the value of your settlement. With the right solicitor, you can challenge, clarify, or remove unfair post-termination restrictions, and ensure you maximise the take-home value of your settlement.
Our solicitors are SRA-regulated experts in UK settlement agreement law, offering immediate same-day remote support with all costs covered by your employer. We make sure every restrictive covenant is tailored and fair, and that you only sign once you are fully informed and satisfied.
For tailored advice, call us on 0207 459 4037 or book your settlement agreement advice online for a remote video appointment at your convenience.
