Employers often choose to insert restrictive covenants into their employment contracts as a mechanism to protect their business interests when their employees leave. They are generally more appropriate for those more senior employees who have access to confidential information and/or have key relationships with clients, suppliers or other employees. However, it appears that more and more employers are including them as a standard feature in their employment contracts regardless of whether such clauses are relevant to the particular employee.
When drafting restrictive covenants it’s important to ensure that the ambit is not too wide in terms of restricted business activity, geographical location and radius and the duration of the restrictions. If they are overly restrictive then the Court is likely to view them as an unlawful restraint of trade and thereby render them unenforceable. In making this determination the Courts look to strike a balance between the employer’s interests, and allowing the employee the freedom to work where he chooses and to take advantage of his own professional skills and knowledge. Covenants included in a contract only to deter an employee from leaving are most unlikely to be enforceable.
This position was confirmed in the recent judgement of Bartholomew’s Agri Food Limited v Michael Andrew Thornton. Whereupon Bartholomew’s (the Applicant) made an application for an interim injunction against Mr Thornton (the Respondent) to enforce the terms of a restrictive covenant contained in the respondent’s contract of employment. The Applicant argued that there were two aspects of protectable interest, namely customer connection and confidential information. However the Respondent argued that the relevant clauses relied upon by the Applicant were in restraint of trade, unreasonable and unenforceable.
The Respondent was employed as an Agronomist who began working for the applicant in 1997 as a trainee Agronomist. He resigned in 2015 and upon the expiry of his notice period he took up employment with Pro Cam UK Ltd who the applicant argued was a direct competitor. The Respondent signed a contract of employment in November 1997 and it was observed that the provisions were not well drafted; there were no definitions and, on one reading, the covenant prevented the Respondent from working in six counties.
The question for the Court was whether the Applicant could demonstrate that they had a legitimate business interest requiring protection and that the relevant clause on its true construction was no wider than reasonably necessary.
It was decided that the relevant restrictions were in restraint of trade and therefore unenforceable. The Court referred to the authority in Pat Systems v Neilly  IRLR 979 whereupon it was held that if a non competition covenant had been unenforceable at the time it was agreed then it remained unenforceable even if the employees had been promoted to a role where the covenant would have been regarded as reasonable. As the restrictions were imposed on the Respondent as long ago as 1997, at a time when the respondent was a trainee agronomist with no experience and no customer contact its terms were manifestly inappropriate for such a junior employee.
In addition to this it was held that the covenant was far wider than was reasonably necessary for the protection of the Applicant’s business interests as it applied to all customers of Bartholomew’s and its associated companies regardless of whether the Respondent had knowledge of those companies and regardless of whether the respondent had carried out any work for them. The application for injunctive relief was refused.
This authority can only serve to demonstrate the importance of ensuring that restrictive covenants are fair and reasonable so far as required to protect a legitimate business interest. They should be tailored to each employee and should not be so restrictive that they could be construed as a restraint of trade. Furthermore, if you decide to promote an employee to a more senior role then you should issue him or her with updated contracts containing further restrictions so that there can be no doubt that you remain protected so far as it is reasonable.
If you are interested in reviewing existing restrictive covenants or introducing new ones, specialist legal advice is essential. Please give me a call on 0151 239 1009 or send an email to firstname.lastname@example.org.