17 January 2014: Enforcing Post Termination Restrictions:
Some employers worry that even if they have post termination restrictions preventing ex staff members from poaching customers, that those restrictions are seldom enforceable.
In East England Schools v Palmer reported this week, the High Court looked at post termination restrictions preventing Ms Palmer, a recruitment consultant in the education sector, from dealing with candidate teachers or schools for six months after leaving.
Ms Palmer argued that the restrictions were not enforceable as the company had no ‘proprietary interest’ requiring protection. However the High Court took the view that the company needed this protection because it was central to Ms Palmer’s role that she build relationships with candidates and recruiters.
This was even though, in the recruitment sector, the Court accepted there is little loyalty owed to recruitment consultants, and much of the relevant information about clients was publicly available anyway.
The Court stated that a good, trusting relationship could make all the difference between otherwise similar recruitment consultancies. Consultants such as Ms Palmer would still be aware of potentially important information which was not publicly available.
Therefore the Company was able to enforce the post termination restrictions, and having lost, Ms Palmer was no doubt whacked with a heavy bill for legal costs.
If you have staff with client-facing roles, ask yourself what damage they could do to your business if they left and tried to take your clients with them. If at all concerned about this, you need to make sure that you get carefully drafted post termination restrictions put into place.
A restriction preventing the ex-employee from working in competition at all for a 12 month period is unlikely to be enforceable. A restriction preventing an ex-employee from poaching clients with whom he or she had personal dealings for six months after leaving (for example) is more likely to be enforceable. In any case these clauses need to be carefully drafted to ensure that they are reasonable and therefore enforceable.
See our posting on Protecting Trade Secrets
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