Restrictive covenants are only enforceable if they are only as wide as they need to be to protect a legitimate business interest in regard to that employee.
They should be carefully considered when being agreed to and reconsidered whenever an employee moves sideways or up or down.
The recent case of Bartholomews Agri Food Ltd. v Thornton (2016) is an illustration of how badly thought out restrictive covenants applied across the board are usually unenforceable.
BAF was a supplier of goods to the agricultural sector. Mr. Thornton began as a trainee in 1997. He resigned in December 2015 to take up employment with a competitor.
BAF applied to the court for an injunction to enforce the terms of a restrictive covenant in Mr. Thornton’s unemployment contract which provided that: –
- Thornton would not be engaged in work supplying goods or services of a similar nature competing with BAF to BAF’s customers for six months post termination;
- Would not work for a trade competitor within BAF’s trading area (in the contract specified to be Sussex, Kent, Hampshire, Wiltshire and Dorset) for six months.
The court held the covenant was unenforceable. It had been imposed on Mr. Thornton when he began working as a trainee with no experience and no customer contacts. The clause was inappropriate for him then, and in accordance with a decision known as Pat Systems v Neilly, if a restrictive covenant is unenforceable due to the employees status at the time it was agreed, it remains unenforceable even when they have become a senior employee.
The court also decided the restrictive covenant was wider than was reasonably necessary to protect BAF’s business interests because it applied to all of BAF’s customers even though Mr. Thornton only had dealings with a very small percentage of their customer base.
The court stated a restriction limiting Mr. Thornton’s contact with customers he had dealt with would have been okay if agreed with him when he was last promoted.
The employer was also unable to enforce its “confidential information” clause which it had not specifically defined.
Employers also tend to agree contracts of employment with restrictive covenants when somebody starts with them, but these and, as well as not being checked as appropriate at the time, are not reconsidered on promotion or movement to another job either.