Court will look at whole situation when considering enforceability of restrictions on ex-employee
Employers should consider whether other factors are consistent with any ‘legitimate business interests’ they claim to be protecting through non-compete clauses and other restrictions on a particular employee. Otherwise, they risk the non-compete clause being found unenforceable, the High Court has ruled.
Two senior employees were not subject to any restrictions against poaching staff or being involved with competitors if they left. However, 17 junior employees were subject to such restrictions for six months after they left. The junior employees also had to give just one week’s notice if they left.
The senior and junior employees all left and joined a competitor. Their employer suspected the managers had persuaded the junior staff to go with them, and applied for injunctions against them all. It argued that the restrictions were enforceable as they were necessary to protect the company’s legitimate business interest of maintaining a stable workforce.
Previously, courts had considered the restrictions on each individual employee in isolation as to whether they protected a legitimate business interest. However, the High Court also took into account the surrounding circumstances in this case. It ruled that the fact that junior employees could leave with just one week’s notice was inconsistent with the argument that a stable workforce was important to the employer. If the restrictions were necessary to achieve this, the Court queried why the senior managers were not also subject to them.
Overall, the employer had failed to show the restrictions were intended to protect a legitimate interest of maintaining a stable workforce. The restrictions were therefore unenforceable.
Employers should ensure they look at the restrictions imposed on all their employees, the notice period required of each type of employee, and all other relevant factors, to ensure they are consistent with the legitimate interests they claim the restrictions are to protect.
Jonathan Waters is the founder of Helix Law. Before qualifying as a Solicitor he worked in industry and in investment banking for over a decade. He was also the Partner in charge of Commercial Litigation, Employment Law and Property Litigation at Stephen Rimmer LLP. Jonathan has wide experience of helping and advising businesses to avoid or to deal with commercial disputes and in particular construction disputes.
This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice.