When recruiting for a senior position, most businesses will consider the need to include restrictive covenants in the contract of employment, for example, to prevent the employee taking knowledge acquired within the business and using it to compete against them when they leave. However, businesses often overlook an employee who acquires seniority through promotion.
Restrictive covenants are scrutinised carefully by the courts as they can be onerous on the person they are enforced against, especially if an injunction is granted to prevent the employee from taking suitable employment for a significant period, thereby damaging them in the labour market.
In Tenon FM Ltd v Crawley, the High Court refused to grant an injunction against a former employee on the basis that her former employer could not produce evidence that she had ever agreed to be bound by the restrictions (in fact she said that she had refused to sign what she considered to be “onerous and adverse terms”). The fact that the employer could not locate a signed copy of her most recent contract of employment supported her claim.
The Court also said that if the company had wanted to make sure they were protected by the restrictive covenants they would have made sure that she had signed the contract. There was nothing in the parties’ conduct, or in her continued employment for the Court to conclude that she was bound by the restrictions.
What does this mean for your business?
Consider the key employees within your business and whether there is adequate protection if they were to leave.
Are you able to produce signed agreements for all of these senior employees, or are your records on file out of date?
If they have become more senior and do not have adequate restrictive covenants, think about offering an updated contract including restrictions. You will need the employee to sign up to these, or they may not be enforceable.
A link to case can be found HERE.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.