Blue Chi’s

Restrictive covenants (RC) are used by the emplo9yers to protect themselves against damaging competition and misuse of confidential information by ex-employees. In employment cases the court attempts to essentially hold the ring between the interest of the employee to be employed in the future as he wishes and the employer’s interest to preserve his business from disclosure by an ex-employee. Thus, RC must not go further than reasonable for the protection of the employer’s business interests. The employee is entitled to use to the full any personal skill or experience even if this has been acquired in the service of his employer.

 

The courts have been restrictive in their interpretation. WAC Ltd v Whillock (1990), the clause prohibiting from carrying on a business in competition did not prevent the employee from acting as a director or an employee of a competing company.

 

If the employee is wrongfully dismissed, this will render the restrictive convent unenforceable even though it is reasonable. (Briggs v Oates).

 

Different considerations may apply depending on the nature of the RC. For example, a clause not to employee the employer’s ex-employees is less restrictive than a clause not to compete.)

 

To be upheld by the courts, a reasonable RC will normally prevent the employee from soliciting former customers rather than stopping the employee from working at all, unless there are good reasons for doing so. However, it was not unreasonable in Dentmaster UK Ltd v Kent to prevent the solicitation of customrs with whom the the employee had no recent connection.

 

If restricted from operating within a particular geographical area, the area must be reasonable. A worldwide restrain may be valid only where the employer’s business is of a similar extent. (Nordenfelt v Maxim Nordenfelt Guns and Ammunition Ltd (1894)).

 

Whether the particular area is valid will depend on the size of the area and its relationship with the employer’s trade or professional connections. In Greer v Sketchey Ltd (1979) the employee was employed for 20 years by D whose branches covered Midlands and London areas. The employee was responsible for the Midlands, but the contract provided that he must not within 12 months of its termination directly or indirectly engage in the UK in any similar business. The court said that this was too wide since he had responsibilty for only a part of that area.

 

However, in the case of Littlewoods Organisation Ltd v Harris (1997) a nationwide RC was held to be reasonable since it was the only way to protect the respondents mail order business when the ex employee went to work for thier direct national competitor.

 

The court will refuse to whittle down RCs which are too wide merely so as to make them enforceable. (J A Mont (UK) v Ltd Mills (1993)). The courts may sever a part of the restraint and uphold the rest of it only if the severed pats are independent of one another and can be severed without the severance affecting the meaning of the part remaining. (Blue Pencil Approach)

 

RCs generally must be in the public interest to be enforceable, this depends on the exercise of the judges’ discretion in each case. In Greig v Insole (1978) restraint on cricket players could be enforced because it would deprive the public from watching first class cricket players.

 

Where the case is to be held to be unenforceable on the grounds of public policy, it may be that the employee remains entitled to rely upon the contract as long as the unenforceable provision does not through removal necessitate modification to what remains.

 

RCs are normally enforced by injunctions, but the court will not grant an injunction where the effect is to compel the employee to go back to work for the employer.

 

Where an interim junction is sought, the principle is laid in the case of American Cyanamid v Ethicon Ltd (1975). For a claimant to obtain an junction, he will have to show that there is an arguable case and that damages would not be an adequate remedy. An RC case where this was applied is Lawrence David Ltd v Ashton (1989).

 

GL injunction is not available unless the employer has a contractual right to send the worker home without providing him work to do. (William Hill Organisation v Tucker).

 

The courts will not allow an injunction which keeps an employee out of his profession for a period which is unreasonably long, or where the employee takes up a post which is not directly competitive with his employer. ( Symbian Ltd v Christensen)

 

The injunction granted should not go beyond that absolutely necessary to protect the employer’s situation. In GFI Group Inc v Eagleston the injunction was granted for 13 week GL when the contract has a 20 week requirements for the notice.

 

The issue will also be affected by the whether the employee’s skill would deteriorate or whether there was a general right to work.