1 April 2016: Post Termination Restrictions and Restraint of Trade
Post termination restrictions (limiting an ex-employees right to do business with clients of their old employer or work for a competitor for a period of months after leaving) will only be enforceable if reasonable in terms and scope to protect legitimate business interests.
In Bartholomews Agri Food v Thornton, reported this week, the High Court considered the enforceability of restraints of trade, and found in favour of the employee.
The Court held that a restriction which was unenforceable when it was first imposed, remains unenforceable. This is the case, even if the employee was subsequently promoted to a more senior role for which the restriction would have been reasonable.
When Mr Thornton joined as a trainee in 1997, he had no experience or client-following and the non-competition clause (which prevented him from working with any existing customers for six-months after leaving) was inappropriate and in restraint of trade. Even though he got more experience, and developed client relationships later on,the restriction was unenforceable.
Furthermore, the terms of the restriction was drafted too widely and was unreasonable as it sought to prevent Mr Thornton from dealing with any customer regardless of whether he had had any prior dealings with that customer or not. He only worked with a small minority of company customers and he should be able to work with the rest once he had left.
The Court reached this decision, even though the employer would continue to pay the employee in full during the six-month period of the restriction.
The case is a lesson to all employers that post termination restrictions should be drafted and applied very carefully.
Reculver Solicitors: solicitors advising on post termination restrictions, restrains of trade and restrictive covenants. Tel 0207 118 0950. email@example.com