My contract is “in the post”…

Posted 30/10/2012

A decision by the High Court may have considerable implications for employees who “forget” to sign and return revised contracts of employment.The High Court has handed down a decision on the enforceability of post termination restrictive covenants in employment contracts in the case of FW Farnsworth Ltd and anor –v- Lacy and others [2012] EWHC 2830.

Post termination restrictive covenants are an attempt by employers to prevent ex-employees from entering into unfair competition with them for a certain period of time after the contract of employment is over – sometimes within a certain distance of the ex-employer’s business. A senior employee has the potential to cause massive harm to their employer’s business as they are entrusted with the key customer relationships and crucial management information. Employers will, therefore, be keen to protect themselves with such restrictions.

Commonly, there are arguments about whether such restrictions are capable of being enforced because of the way they are worded. However, in the Farnsworth decision, the issue was whether an ex-employee was bound by the promises in a new contract of employment provided to him after he was promoted, but which he had not signed and returned.

The new contract contained post termination restrictive covenants on which the employer sought to rely. The High Court was prepared to find that the employee’s acceptance of the new employment contract could be implied because he had applied for private medical cover that was only available to him under the new contract.

This case makes it clearer than ever that employers must ensure that employees sign and return revised contracts where they have been issued following a change in role or a promotion, to give them the peace of mind that they can rely on the new contract’s terms.