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Restrictive Covenants in Unsigned Employment Contracts May Be Worthless

Employment contracts that remain unsigned are frequently not worth the paper they are written on. The point was resoundingly made by a High Court case in which a large services company was unable to find even one signed copy of a contract with a senior employee after she resigned, allegedly to join competitors.

The company claimed that its former operations director had breached a number of covenants in her contract which, amongst other things, forbade her from soliciting its customers or working for competitors for certain periods after the end of her notice period. She claimed that she had been constructively dismissed and that, in any event, none of the covenants were binding on her.

In refusing to grant the company a pre-trial injunction against her, the Court noted that, despite being a major employer and having an extensive human resources department, it had remarkably failed to identify a signed copy of any of the three contracts the woman was said to have entered into. The obvious inference was that she had refused to sign contracts that had sought to impose increasingly onerous covenants upon her as she climbed the ladder of seniority.

There was also a complete absence of evidence of any valuable consideration given to her in return for her agreement to the purported restrictions on her post-termination conduct. That was, on the face of it, fatal to the company’s claim and it had failed to establish that there was a serious issue to be tried.