Often employers will include restrictive covenants within employment contracts, which seek to restrict their employee’s freedom to work for a competitor in the future.
If the employee has held a position of responsibility and has had access to important information as part of their role, then their employer will want to try and restrict their future use of that information.
The types of matters that employers will try to protect include:
1. Trade secrets, confidential information and “know-how”;
2. Details of customers, suppliers and contacts (trade connections);
3. Workforce skills
Trade secrets include confidential processes (such as designs and methodologies) and confidential information (such as price lists and client databases).
In determining whether information is confidential, the Court will apply the test set out in Thomas Marshall Exports Ltd –v- Guinle :
1. Does the employer think disclosure of the information would be harmful to him and/or advantageous to competitors or others?
2. Does the employer believe that the information is still confidential? i.e. it is not already in the public domain.
3. Are those beliefs reasonable? (Taking into account industry practices)
Employers will often face competition from their former employees and therefore will want to restrict their ability to use trade connections.
Non-solicitation clauses try to restrict ex-employees from soliciting a former employer’s customers. They usually extend to customers with whom the ex-employee has had contact with during the course of their employment. Usually, the clause will be limited to cover a specific period of time before termination of the employee’s contract; for example, the last 6 or 12 months.
In considering whether an ex-employee has breached a non-solicitation clause, it will be necessary to consider all the surrounding circumstances regarding the contact between the ex-employee and the customer.
In order to enforce restrictive covenants, proceedings are brought in the Civil Courts, rather than the Employment Tribunal. If the employer is seeking an injunction, then proceedings will be commenced in the High Court.
The employer must have a legitimate business interest that requires protection. The key question is whether the covenant is reasonable.
Cases involving restrictive covenants are very fact sensitive and consideration must be given to the particular circumstances of the case, including the industry in which the employee and employer operate.
If you require advice regarding the enforceability of restrictive covenants, then please contact Farleys’ specialist commercial litigation department on 0845 050 1958. Alternatively please complete an online enquiry form.