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Restrictive covenants preventing a former employee from
soliciting customers are only enforceable if necessary and no wider than
necessary to protect the legitimate interests of the business. Customer lists
and information about customers is a legitimate interest. Generally, non-solicitation
clauses should be limited to customers with whom the employee dealt within a
specified period before the employment terminated. But this case shows that is
not always so. It depends on the influence the ex-employee had over customers.
Mr C was a director of SNSL. His contract of employment
included a non-solicitation clause preventing him, after his employment ceased,
from soliciting the business of customers ‘which could have been undertaken by
[SNSL]’. Mr C resigned and contacted five SNSL customers as a result of which
those customers terminated their contracts with SNSL. SNSL sued Mr C and his
new company for damages for the value of the business lost. Mr C argued that
the non-solicitation clause was unnecessarily wide because it could have been
limited to those customers with whom he had dealt within six or twelve months
before the date he resigned.
The Court of Appeal
disagreed and allowed the claim for damages. The six-month period was
reasonable and Mr C was a key employee who could influence all customers
however far in the past. Furthermore, the limitation of the clause to business
which could otherwise have been undertaken by SNSL excluded from its scope any
customers who would not have done business with SNSL anyway.