Employment contracts need professionals!

Posted: 18th January 2019

Hands tiedNon-solicitation and non-compete covenants in employment contracts impinge on workers’ personal freedoms and, as a High Court case showed, examples that are unclear or too broad in their effect are highly likely to be declared unenforceable. That is one very good reason why professional drafting is indispensable.

The case concerned an employee who resigned from a company that provided food products to Chinese restaurants and shops and went to work for a competitor.

The company claimed that, as a result of confidential information and clients that he had taken with him, it had swiftly lost business worth about £200,000.

The company launched proceedings with a view to enforcing certain covenants in his employment contract that sought to impose wide-ranging restrictions on his ability to compete with the company or to solicit its customers following his departure. It sought a pre-trial injunction to hold him to those restrictions.

The Court noted that the covenants were poorly drafted. It was, amongst other things, unclear whether they would remain in force for six months or 12 months following his resignation. The restrictions, both geographically and in terms of restraint on the defendant’s ability to make a living, also went beyond what was reasonably necessary to protect the company’s legitimate interests.

The court found that the non-compete clause was unlikely to be enforced following a trial. Such enforcement would inflict unquantifiable loss on the employee that outweighed any damage that might be suffered by the company. As a foreign national, his immigration status would also be jeopardised if he were required to relinquish his job with the competitor.

In striking a balance and granting a limited injunction, the Court said it was arguable that the non-solicitation clause could be saved by severing those parts of it which would otherwise render it unenforceable. Whilst enabling the defendant to keep his job, the injunction would safeguard the company’s goodwill and customer base pending trial.