Most employees have 'restrictive covenant's imposed in their contracts of employment. These covenants are promises by the employee not to do certain acts which in the main, may be detrimental to the employer.
A vexed area is the extent to which an employer is entitled to impose obligations on employees at the end of their employment, or after their contract of employment has ended. To be enforceable after the end of the employment contract, the restrictive covenants must be reasonable, necessary to protect legitimate business interests and must not last longer than necessary.
These issues were considered by the High Court in a recent case.
The claimant company was in the IT business and employed the defendant as a Sales Account Manager. Following his appraisal the defendant was promoted to Corporate Account Manager in 2013. Upon his promotion, the claimant company imposed some new restrictive covenants in his employment contract.
The defendant was employed to launch a new highly sensitive product. The defendant's new role gave him access to the company's confidential customer and contacts lists.
The defendant left his job and told his employer that he was going to set up his own business. Prior to leaving, he told clients of his employer that he was going to set up on his own, he used the company's confidential data and contacted one of his employer's clients to compete with his employer after he left.
The High Court held that the restrictive covenants that the employer had imposed were properly introduced in that there had been 'consideration' for them. Broadly this means that the employer had given something in return for the covenants. In this case the employee had an appraisal and signed a new contract for a higher salary.
The Court held that the employee had breached his duties of good faith and confidence as he had misused his employer's data and contacts. Accordingly the employer was entitled to enforce the covenants again the employee to stop him trying to take his former employer's clients.
The employer was awarded damages of £29,852 and an injunction to stop the employee from breaching the covenants in his contract after he had left.
This sounds like a common sense interpretation by the High Court, which led to a fair outcome.
We do not usually report on consultations in our newsletters, but it is worth mentioning that the Government is consulting on whether to make such non-compete clauses unenforceable by employers. The logic behind this is to 'remove the barrier to innovation and employment'.
We will report in the coming months as the consultation progresses, as employers will need to review their employment contracts if these changes are introduced.
To discuss this or any employment related issue, contact us.