Post employment restrictive covenants – a costly case of spot the difference

A recent case turned on the following wording restricting an employee from poaching colleagues after he left :- “he shall not employ, engage, or appoint or in any way cause to be employed, engaged or appointed a critical person….” Many legal issues and disputes turn on just a few words, which is why an experienced

Home » Employment law » Post employment restrictive covenants – a costly case of spot the difference

A recent case turned on the following wording restricting an employee from poaching colleagues after he left :-

“he shall not employ, engage, or appoint or in any way cause to be employed, engaged or appointed a critical person….”

Many legal issues and disputes turn on just a few words, which is why an experienced solicitor can make all the difference. You may have already guessed that the problem with the above clause is the words “critical persons”. The precise issue is that the clause is simply too wide and uncertain.

Whilst you might argue, as an employer, that a former employee should not entice any of your staff to join him or her after he has left and perhaps started working for a competitor, the law does not work that way. If you want the protection of a restrictive covenant it must be very clear and very proportionate.

The case in question, White v Weaver, is interesting in that a second mistake was made by whoever drafted the restrictive covenants, which were on the face of it important because the employee was working in sales for a publisher, and in that position and industry, the employer was rightly concerned.

As regards the 2nd mistake, here’s the extract of that clause :-

“shall … be forbidden to deal with and/or to approach any Relevant Customer of the Claimant for the purposes of carrying out a profile for any such customer in any business magazine, or placing an advertisement for any such customer in any business magazine”.

Any ideas what’s wrong ?

The issue with this clause is the words “any relevant customer” because such a definition may well include a very large class of customers whom the employee has never dealt with and in a niche industry could easily constitute a restraint of trade making it almost impossible for the employee to find an alternative position in that industry for an extended period. The clause was held to be unenforceable even though it also had a time limit which was not necessarily unreasonable and was also caveated to an extent in terms of activities.

Getting it wrong in terms of employment restrictions can be very costly. Not only can it mean lost business but in a case like the above, the employer applied for an injunction. Where this tactic works it can be extremely effective and constitute a decisive end to the dispute and potential loss for the employer. If it doesn’t work, it can be extremely expensive – the employer will have salt rubbed into his, her or it’s wounds by not only paying own legal costs but also, in all probability, the employees.

In tactical terms, it’s also worth being aware that thinking that the mere threat of an injunction will frighten the employee enough to desist (due to the threat of a costs order) may be wide of the mark. Many employees will be aware of the risks and before joining a competitor will obtain a full indemnity from the new employer against any legal or associated costs of the previous employer taking action for breach of restrictive covenant.

Employment law

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