Policy News Journal - 2014-15

In March 2014, Mr Rodgers left Sunrise, having accepted a position with a competitor commencing in January 2015. His contract contained a 12 months' notice provision and enforceable restrictive covenants. The contract also provided for garden leave (at Sunrise's discretion which was not exercised) for a period which would not normally exceed 6 months. From April 2014, due to his unauthorised absence, Sunrise ceased to pay Mr Rodgers' salary but confirmed that payments would recommence on his return to work. Mr Rodgers claimed that non-payment of salary was a bar to affirming the contract, which was not accepted. The Court held Sunrise had good reason to keep the contract alive and granted an injunction to prevent Mr Rodgers working for a competitor during a reduced notice period agreed by Sunrise, deciding that this would not force Mr Rodgers to return to work for Sunrise. The Court allowed a post-termination restriction of 10 months from the last client contact. This still meant a shorter overall period of restraint than had Mr Rodgers abided by the terms of his contract. While the courts are not prepared to order specific performance of an employment contract, the decision affirms they will not permit a wrongdoing employee to disregard protection of the employer's legitimate business interests.

Rewriting restrictive covenants

4 August 2014

The Court of Appeal has confirmed the scope that the courts have to re-write restrictive covenants in departing employees' contracts which have been poorly or ambiguously drafted.

We are grateful to Employment Law Plus for this report of the hearing:

Restrictive covenants are a crucial tool for employers seeking to protect their business and revenues. They can protect confidential information as well as limiting the threat of employees leaving and taking clients, revenues or colleagues with them. This is particularly important for employers at a time when the recruitment market is becoming more buoyant and team moves and senior hires are on the increase. However, as these covenants potentially restrict an employee's ability to work elsewhere; they can only be enforced if they can be justified as being necessary to protect the business's legitimate needs. If a court believes that a covenant goes further than this, and is more restrictive than is necessary, it will refuse to enforce it - even if some form of lesser restriction would have been justifiable. This means that careful and appropriate drafting is vital to ensuring that restrictive covenants give you the protection you need, - the recent case summarised below highlights just how small mistakes can render the protection worthless. In the case of Prophet plc v Huggett, Mr Huggett (H) worked as a sales manager for Prophet Plc (P), a provider of computer software products to the fresh produce industry, before being head-hunted by a competitor firm. H's contract contained a 12 month non-compete restrictive covenant which prevented him from being engaged in the sale of any products in which he was involved whilst employed by P. P sought to enforce this covenant, applying for an injunction preventing H from working for the new employer or any other software supplier in the UK fresh produce sector in the 12 months following H's termination. The High Court decided that, as drafted, the clause provided no protection to P. The clause sought to prevent H selling products in which he was involved whilst employed by P. On a literal reading of the words, this just prevented H from selling P's products, which were unique to P. It did not prevent him from selling similar, competing products marketed by P's competitors.

CIPP Policy News Journal

08/04/2015, Page 113 of 521

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