Rogers & Norton News

Will your Employment Covenants Work in Court?

Friday, December 16, 2016

Our Litigation and Employment teams are approached by clients, employers and employees with the same question, “Can the former employee’s employment and future commercial activities be restricted”.

Phil Kerridge comments, “Many employees have ‘restrictive covenants’ 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.  One debatable 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. It is a myth that restrictive covenants are generally unenforceable, but they do need to be carefully drafted. Here we explore some of the Dos and Don’ts of these clauses in employment contracts”

Phil regularly drafts covenants for employers and advises employees before signing a contract on the enforceability of the covenants. Phil advises “Firstly make sure that when an employee joins an organisation, the type and length of the restrictive covenants are considered for the particular employee, in the context of the job they are doing and in the industry you operate in. Remember that a restrictive covenant will be enforceable if a court is convinced that a business has a legitimate business interest to protect and that the restriction goes no further than is necessary to do this.

It is also vital to clearly establish what your legitimate interest is, on the basis that this determines what type of covenant you should have. Should it be a non solicitation clause, or one that prevents you from working in a geographic area for example.”

When considering if a restrictive covenant is enforceable, a court will always consider this as at the time the employee joins the business. If an employee joins at a junior level and has a wholly unreasonable restrictive covenant imposed on them but works his/her way up the organisation to a position where the covenant is now reasonable, the covenant will still be unenforceable because it will be considered in the context of the job the employer was originally employed to do.

When it comes to enforcing or opposing a restrictive covenant, our litigation team steps in. Peter Hastings comments “Quite often, the issue arises when an employee is going into business alone or has been poached by a competitor, usually with the main allegations being that there has been a breach of confidence or customers been approached for their business.  In addition to advising on the covenants, the collation of evidence is crucial and often involves searching computers and servers. Speed is of the essence and we are experience in dealing with urgent Injunctions (seeking and opposing) to protect our clients’ interest”.

Peter warns “The tentacles of disclosure are very long and can extend to personal texts, emails and indeed those of family members. The potential risks are high, with the losing party having to pay the other side’s significant legal costs, as well as any damages”.

We have successfully enforced employment restrictive covenants and had them struck out through the Courts.  We have also obtained orders for the return of confidential information (for example copies of the database, customer lists, damages and costs.  Past history shows that attempts at breaching covenants arise around the end of the year and into the New Year, our Litigation and Employment teams can expect to be busy in the Courts.

If you have any queries or need advice and guidance on employment contracts then contact either Peter Hastings on – telephone 01603 675639 or Phil Kerridge or telephone 01603 675671.