Poorly drafted covenants get picked apart!

Posted: 21st March 2019

Contract DraftingThe balance to be struck between the protection of legitimate business interests and the right of employees to make a living has never been easy to strike. In a case on point, the High Court picked apart restrictive covenants in a food industry worker’s contract and found the majority of them to be unenforceable.

The worker was employed as a marketing advertising manager by a company which manufactured and supplied Asian foods. His contract contained comprehensive and wide-ranging covenants which, amongst other things, forbade him from soliciting the company’s customers, or working for commercial rivals, after he left the company’s employ. When his employment by the company came to an end, and he swiftly joined a competitor, the company launched proceedings.

In ruling on the matter, the Court identified flaws in the drafting of the covenants: The worker was forbidden from taking employment with competitors based in ‘Europe’, but there was no indication as to whether that was a reference to the continent, the European Union or some other entity. The covenants were stated to remain in force for six months in the case of ‘junior’ employees, and 12 months in the case of ‘senior’ employees, yet the contract gave no guidance as to which employees were to be considered junior, and which senior.

The Court found that, in any event, neither the non-compete nor the non-solicitation covenants were necessary to protect the company’s legitimate business interests. Whilst employed by the company, the worker’s contact with its customers had been minimal.

Given that the company only had clients in nine European countries, the geographical scope of the restrictions was too wide. The same applied to the broad restrictions that the covenants sought to impose in respect of employers that the man could work for, and roles that he could perform for them.

The Court upheld the company’s claim that, for a period of about two months after his departure, the worker breached his contract by retaining confidential documents belonging the company on his laptop and personal online drive. In all other respects, however, the company’s claim was dismissed.