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Courts Taking Tougher Approach to Restrictive Employment Covenants

The approach of the courts to restrictive covenants in employment contracts is perceptibly toughening – as two trainee agronomists found out after they resigned from their jobs and went to work for a direct competitor.

The pair’s contracts contained covenants which banned them for six months after the expiry of their notice periods from dealing with, or soliciting, any of their employer’s clients with whom they had dealt in the 12 preceding months. With the financial backing of their new employer, they sought a High Court declaration that the covenants were neither valid nor enforceable.

In refusing their application, the Court found that they had expressly consented to the simple, clear and precise terms of the covenants. Those terms went no further than was necessary and reasonable to protect their former employer’s legitimate interest in preserving its goodwill and customer connections.

As part of the Government’s drive to make Britain the best place in Europe to innovate and start a new business, the Department for Business, Innovation and Skills is currently seeking views from employers and employees on whether non-compete clauses are currently stifling entrepreneurship and innovation.  

The consultation document can be found here.