Restrictive Covenants


Restrictive Covenants 

Another recent case Bartholomews Agri Food Ltd v Thornton [2016] EWHC 648 (QB) has highlighted the fact that boiler plate restrictive covenant clauses are no longer acceptable. It is clear from recent judgments that any attempt to strengthen a clause beyond what is reasonable to protect a legitimate business interest will be struck out as being a restraint of trade.

In the case above the fact that the employment contract had been written many years ago when Mr Thornton was a junior employee with little or no access to information that could harm the company meant that the clause was still unreasonable 20 years later when he did hold information that could rightly be protected.

We can see that it is extremely important that any restrictive covenants are bespoke to the employee in question and not simply designed as a one size fits all.

The clause in contention is one that many businesses will be familiar with,

10.2 PROTECTION OF KNOWLEDGE ACQUIRED DUE TO THE COMPANY’S SPECIALISED BUSINESS

Employees shall not, for a period of six months immediately following the termination of their employment be engaged on work, supplying goods or services of a similar nature which compete with the Company to the Company’s customers, with a trade competitor within the Company’s trading area, (which is West and East Sussex, Kent, Hampshire, Wiltshire and Dorset) or on their own account without prior approval from the Company. In this unlikely event, the employee’s full benefits will be paid during this period.”

But, which the judge said had been particularly badly drafted as the definitions were weak or non-existent. The last element of the restrictive covenant which purports to pay the ex-employee for the period of the covenants also failed to impress the judge, who simply saw this as an attempt to buy out an unenforceable clause.

Premier Legal can help with the drafting of employment contracts that have Restrictive Covenants that will be fair and which will withstand a judge’s scrutiny.

Insurance

The ‘Absolute’ insurance policy that we offer our retained clients now has Restrictive Covenant protection as a free addition. This means that you can fight any breaches of your covenants without a huge legal bill.

Contact one of our employment experts at Nottingham on 0115 988 6211 or London on 0207 408 9427 for more information on how we can help with Restrictive Covenants.

To view the case on BAILII please click here