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Employment Law

Legal guidance - compliance - software

11 APR 2016

Restrictive covenants - get them right first time and keep them updated

Restrictive covenants - get them right first time and keep them updated
Bob Fahy
Senior Associate, Veale Wasbrough Vizards

The High Court has rejected the reasonableness of a post-termination restrictive covenant, highlighting to employers the need to reconsider the nature and scope of restrictions when employees are promoted.

The facts

In the case of Bartholomews Agri Food v Thornton, Bartholomews supplued agronomic advice to farmers and landowners. Mr Thornton started at Bartholomews as a trainee agronomist in September 1997; he qualified as an agronomist and worked for them until his resignation on 21 December 2015.

His job involved advising Bartholomews' customers on crop nutrition, crop rotation, seed choice and soil conditions. Mr Thornton told Bartholomews that, once his notice expired, he intended to take up a new job with Pro Cam UK Ltd. a retailer which supplies its customers with seed from multiple seed producers.

Bartholomews sought to stop him joining Pro Cam by relying on a contractual clause, stating that for six months from his departure he could not 'be engaged on work, supplying goods or services of a similar nature which compete with the Company to the Company's customers, with a trade competitor within the Company's trading area'.

Bartholomews applied to the High Court for an injunction to enforce this restriction. It had to show that it had legitimate business requiring protection, and that its restrictive covenant was no wider than reasonably necessary for the protection of those interests.

Decision of the High Court

The High Court found that the clause covered a wider geographical area than that of which the clients Mr Thornton had direct dealings were based. The clause restricted Mr Thornton from dealing with a large class of its clients with whom he had no personal dealings.

The judge found that the restriction was 'plainly far wider than is reasonably necessary for the protection of Bartholomews' business interests'. He said that, because the restrictive covenant was imposed in 1997 when Mr Thornton was a trainee agronomist with no experience and no customer contracts, its terms were 'manifestly inappropriate for such a junior employee'.

Bartholomews also argued, even if its restriction was otherwise unreasonably wide, that unreasonableness was cured by an unusual element of the clause which provided for Mr Thornton to be paid his full salary for the period of the restriction. However, the judge said that to 'purchase' a restraint of trade in this way was contrary to public policy, referring to the Court of Appeal case of JA Mont (UK) Ltd v Mills, where the court confirmed that this public policy is not just about employees earning their living, but includes promotion of competition and the proper use of an employee's skills.

Best practice

This case underlines the need to carefully consider the scope of restrictions in relation to the particular employee to whom they apply. It is also a reminder that employers should revisit contractual restrictions when employees are promoted, and expressly replace the restrictions with new ones appropriate to the role.
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