Are your restrictive covenants enforceable?

Posted 02/06/2014

It is understandable that businesses wish to protect their assets, which includes client information, trade connections and other confidential information. It has therefore become common practice for employers to include a restrictive covenant clause in their employment contracts in order to protect such information which can reasonably be regarded as legitimate business interest. Client good will has been accepted as a protected interest to prevent former employees taking or poaching clients for the business that they leave.

Such a clause needs to be reasonable in order to be enforceable and must not be wider than is necessary to protect the interest. It is not only the geographical area that needs to be limited and reasonable but also the period or duration which the restriction will last.

There have been a number of cases which have provided guidance on the acceptable length of the covenants which seek to restrict a former employee’s dealing with clients. The recent case of East England Schools CIC v Palmer and Sugarman [2013] EWHC 4138 (QB) looked at, amongst other things, the reasonableness of the length of restrictive covenants.

The case involved a former employee of East England Schools, a school recruitment agency, who contacted former clients soon after joining her new employer. The former employee had a covenant prohibiting contacting former clients for a period of six months. The Claimant looked to enforce the six month period by relying on recent cases which held that senior employees could be restrained for up to 12 months. Whilst the Claimant was able to successfully enforce the six month covenant, the Judge stated that any period beyond six months would be objectionable.

This case should therefore be a caution for employers when considering restrictive covenants in employment contracts. The reasonableness, and therefore the enforceability, of the length of covenant needs to be carefully considered in relation to the seniority of the employee.

Please contact a member of Employment team for individual advice.