Don’t ‘plant’ your restrictions too early

Fran Read

Restrictive covenants are contractual provisions purporting to survive the termination of employment and restricting employees in terms of their ability to compete, deal or solicit customers or prospective customers or solicit key staff .They can be a useful tool for employers wanting to protect their confidential information, customer base and workforce following the end of the employment relationship. However, clear and careful drafting is required to ensure that these provisions are not held to be unenforceable as a restraint of trade.

In a recent case the High Court provided some clear guidance on the key considerations in this area. Mr Thornton had commenced employment with his employer in 1997 as a trainee agronomist. The contract of employment issued to him on commencement of employment included the following non-competition provision:  “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…”.

Mr Thornton left his employment with Bartholomews some 18 years later in December 2015 to work for a competitor. Bartholomews sought to enforce the restrictive covenant in his contract and the matter went before the High Court. The Court held that Bartholomews were not entitled to rely upon the clause to restrict Mr Thornton and that it was unenforceable as an unreasonable restraint of trade. The reasoning behind the Court’s decision can be used as a starting-point for other employers reviewing the likely enforceability of similar contractual provisions. The clause was held to be unenforceable for the following reasons:

This case serves as a useful reminder of best practice in relation to restrictive covenants and the following lessons can be taken:

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Fran Read

Fran Read