Restrictive Covenants

In the judgment of Bartholomews Agri Food v Thornton the High Court rejected the application of a restrictive covenant on a number of grounds and held courts were to look at the reasonableness of the restrictive covenants in question.

First following the judgment in Pat Systems v Neilly, a covenant which was unenforceable when it was first imposed, remains unenforceable even if the employee is later promoted to a role where it could be seen as reasonable.

In this case a clause was inserted to the contract of a trainee in a position where he had no previous experience. The clause prevented him from contacting any of his employer’s customers for 6 months after termination of employment. This was regarded as unreasonable given that the employee had only just started and was an inappropriate restraint on free trade and on that basis the clause was unenforceable.

The court however did not stop there they suggested that as the term was drafted too widely and prevented the employee from contacting any of the employer’s customers it was unenforceable given that he only dealt with 2% of its customers and he could not possibly be required to prevent from communication with the other 98% and regarded this to be “manifestly unfair” to allow such a term. The employer’s contention was that the term was fair has they had a clause to the effect that would pay the employee in full for those 6 months of restriction. The court however declared that this was contrary to the ruling in JA Mont (UK) Ltd v Mills and contrary to public policy for the employer to be able to buy a restraint of trade.

It is very important therefore that should you need to protect your company when an employee has left that you speak to an independent legal advisor and if possible have these drafted by a professional to ensure such clauses are enforceable when and if the need should arise.