Key Takeaways for hiring in Financial Services
At Ortus PSR, we work closely with professionals and firms across the financial services sector. One increasingly important issue in recruitment and retention is the use—and enforcement—of restrictive covenants in employment contracts.
Please note: this article is not legal advice but a summary of insights shared during a recent legal workshop. We strongly recommend seeking independent legal advice before making employment-related decisions.
What Are Restrictive Covenants?
Restrictive covenants are clauses within employment contracts that aim to protect a business’s commercial interests when an employee leaves. They commonly include:
- Non-compete clauses – Preventing the employee from joining a competitor for a defined period.
- Non-solicitation / Non-dealing clauses – Preventing contact with former clients or colleagues.
- Confidentiality obligations – Prohibiting the use or disclosure of sensitive business information.
To be enforceable, these clauses must be:
- Tied to a legitimate business interest
- Reasonable in scope, duration, and geography
- Judged for reasonableness at the time of signing
- Supported by adequate consideration (especially in post-employment changes)
Recent Case Law: What Recruiters Should Know
The courts continue to shape the landscape of enforceability. Here are a few recent examples with practical implications:
- Jump Trading – A reminder that undue delay in enforcement action can weaken a case.
- Allen – Emphasised that employers (and recruiters) can be liable if they knowingly induce a breach of restrictive covenants.
- Tillman v Egon Zehnder – Introduced the "blue pencil" test, allowing courts to remove unreasonable parts of a clause while preserving the rest.
- Boydell v NZP – Reinforced the need for clauses to be tightly focused on genuine business interests.
Practical Tips for Recruitment Professionals
Whether you’re advising clients or screening candidates, a proactive approach is key. Here’s what we recommend:
- Start early – Discuss restrictive covenants, notice periods, and garden leave upfront in the hiring process.
- Seek legal input – Don’t assume a clause is unenforceable; get an informed view from a solicitor where needed.
- Handle with care – Be mindful of privilege in communications and who’s responsible for legal costs if a dispute arises.
Beyond Covenants: Other Legal Risks
Restrictive covenants are just one piece of the risk landscape. Recruiters and hiring managers should also be alert to:
- Misuse of confidential information or client databases
- Breaches of fiduciary duties and duty of fidelity
- Potential exposure to claims of inducement or even conspiracy in contentious hires
Final Thoughts
In today’s competitive market for financial services talent, restrictive covenants are more than legal fine print— they are a critical consideration in every strategic hire. As recruiters, we must understand the landscape, ask the right questions, and when in doubt, encourage clients and candidates alike to seek proper legal guidance.
Need support navigating sensitive recruitment issues?
Contact the team at Ortus PSR—we’re here to help you hire with confidence and clarity.