Protect Your Business: Enforceability of Non-Compete Clauses
Is a non-compete clause enforceable where an employee is paid for the duration of the period in which the restriction applies?
No, was the decision of the High Court in the case of, Bartholomews Agri Food Ltd v Thornton.
Lisa Moore of The Wilkes Partnership considers this outcome of this interesting case which emphasises the importance of restrictive covenants being reasonable and tailored to suit the parties’ circumstances to ensure enforceability.
In this case, Mr Thornton was subject to a 6 month non-compete clause which was limited to a specific geographical area (being West and East Sussex, Kent, Hampshire, Wiltshire and Dorset). Unusually, the clause stated that the employer would pay Mr Thornton for the duration of the 6 months in which the restriction applied. This was so even if Mr Thornton also received remuneration from a new employer during this period.
Despite the entitlement to 6 months’ pay, the High Court held that the clause in question was invalid.
Several factors formed the basis of the Court’s decision. Firstly, the Court was concerned that Mr Thornton had only been a trainee when the provision was agreed; it was felt that the clause was ‘manifestly inappropriate’ for such a low level employee. Secondly, the Court held that the offer to continue to pay Mr Thornton for 6 months post termination was contrary to public policy.
Further, the term was deemed far wider than reasonably necessary to protect the employer’s interests as it restricted Mr Thornton from working with any of the employer’s customers whether or not he had previously worked for them. Finally, definitions were not provided for some references used in the clause which rendered its precise meaning uncertain.
Lisa Moore comments: “Employers should seek to protect themselves as far as possible from the potential for key departing employees to cause damage to their business. A ‘one size fits all’ approach does not work when it comes to restrictive covenants. They must be specifically tailored to the relevant circumstances. Even if reasonable restrictive covenants are adopted when an employee is first recruited, the provisions should be reviewed periodically as the employee progresses and as the employer’s business evolves. Getting this wrong can be a costly mistake leaving an employer with limited recourse against ex-employees.”
For more information about how we can help assist your business in respect of the above issues, from drafting appropriate restrictive covenants, to obtaining an injunction, please contact Lisa Moore or any member of the Employment Team on 0121 233 4333.