Post-termination covenants, the interests they may legitimately protect, and the limits of enforceability. Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd; Tillman v Egon Zehnder Ltd.
Restraint of trade; the foundational case. Lord Macnaghten's test: all restraints of trade are prima facie void, but enforceable if (1) reasonable in the interests of the parties, (2) reasonable in the interests of the public, and (3) the restraint goes no further than necessary to protect the legitimate interest.
Restraint of trade; repudiatory breach; where the employer commits a repudiatory breach of contract which the employee accepts, the employee is released from post-termination restrictive covenants. The covenants do not survive the employer's own repudiation.
Restraint of trade; geographic scope; a 25-mile radius restriction for a door-to-door canvasser was grossly wider than necessary to protect the employer's interest. Excessive geographic scope renders the whole covenant void; the court will not rewrite it.
Restraint of trade; legitimate interests; distinguished between the protection of trade secrets and confidential information (legitimate) and the mere prevention of competition (illegitimate). An employer cannot restrain an ex-employee from using general skill and knowledge acquired during employment.
Restraint of trade; severance; where a single covenant restrains multiple activities forming a single indivisible restraint, the court cannot sever individual parts, the restriction stands or falls as a whole. Contrasted with Nordenfelt where severable.
1 WLR 1 - Confidentiality; an employee cannot take copies of documents but can use memory/skill.
Restraint of trade; extended the doctrine beyond employer-employee relationships to commercial agreements. Any contractual restriction on trading freedom engages the doctrine, though the reasonableness assessment varies by context.
Restraint of trade; legitimate interests; client connections built up during employment are a protectable interest. Lord Wilberforce: a covenant 'must be no wider than is reasonably necessary for the protection of' the employer's legitimate interest. Privy Council.
1 WLR 1308 - Restraint of trade; copyright; a contract in restraint of trade is void if it is unfair and oppressive.
Injunctions; the foundational test for interim injunctive relief: (1) serious question to be tried, (2) damages not an adequate remedy for either party, (3) balance of convenience. Applied across all interim injunction applications including restrictive covenant enforcement.
1 WLR 1472 - Restraint of trade; reasonableness; a 12-month non-compete was reasonable for a senior director.
Ch 117 - Contract; confidentiality; trade secrets are protected post-employment, but general skill and knowledge are not.
Restrictive covenants; affirmation; prior repudiatory breach by the employer did not release the employee from covenants where the employee had affirmed the contract by continuing to work. Affirmation defeats the General Billposting release.
Restrictive covenants; springboard injunctions; relief for misuse of confidential information (a card index of trade contacts taken on departure) is limited to the head start unlawfully gained: an injunction should not extend beyond the period for which the unfair advantage may reasonably be expected to continue. The Court of Appeal confined springboard relief to the 12-month period of the contractual covenant.
Restraint of trade; trade secrets; defined 'trade secrets' vs 'skill and knowledge'.
Injunctions; negative covenants; where a covenant is clearly a negative stipulation (a promise not to do something), the court should ordinarily enforce it by injunction without a full American Cyanamid balance-of-convenience assessment. NICA.
Confidential information; springboard relief must go no further than restoring the parties to the competitive position they would have occupied absent the misuse; interim relief that overshot led to the claimant paying damages on its cross-undertaking. Also laid down safeguards for the execution of Anton Piller (search) orders.
TUPE; restrictive covenants; post-termination restrictive covenants transfer to the transferee under TUPE Reg 4. The transferee steps into the transferor's shoes and can enforce covenants given by the employee to the transferor.
Restrictive covenants; repudiatory breach; followed General Billposting, an employer's repudiatory breach releases the employee from post-termination restrictions. Applied in the context of insurance brokers subject to non-solicitation covenants.
Restrictive covenants; repudiatory breach; majority held (following General Billposting) that an employer's repudiatory breach accepted by the employee releases the employee from post-termination restrictions. Simon Brown LJ dissented, arguing covenants survive repudiation.
Restrictive covenants; non-poaching; an employer has a legitimate interest in maintaining a stable, trained workforce, so covenants against soliciting staff are enforceable in principle. The covenant upheld was limited to directors and senior employees; a blanket restriction on employing former colleagues was regarded as indefensible at first instance and not pursued on appeal.
Restrictive covenants; prior breach; where the employer's breach is not sufficiently serious to amount to repudiation, the employee remains bound by post-termination restrictions. Only an accepted repudiatory breach releases the employee from covenants.
Restrictive covenants; damages; a claim for damages for breach of a post-termination covenant is not extinguished when the covenant period expires, the cause of action crystallises at the date of breach.
EWCA Civ 472 - Contract; restrictive covenants; a tribunal can enforce a covenant if it goes no further than necessary to protect interests.
Restrictive covenants; springboard relief; an injunction can be granted extending beyond the covenant period to prevent the employee from exploiting the unfair advantage gained by pre-departure breach of duty.
Restrictive covenants; non-solicitation; a non-solicitation covenant can protect both client connections and confidential information, it is not limited to one type of legitimate interest. The test is whether the restriction is reasonably necessary to protect the interest identified.
Restrictive covenants; partnerships; each partner in a partnership is a separate employer for covenant purposes. A covenant must be assessed for reasonableness against each partnership individually, not the wider group. Blue-pencil severance applied.
Restrictive covenants; non-dealing; distinguished between non-solicitation (cannot approach) and non-dealing (cannot transact even if the client initiates contact). A non-dealing clause is more restrictive but can be reasonable where client connections are the primary asset.
Restrictive covenants; non-dealing; the distinction between non-solicitation and non-dealing clauses. A non-dealing clause prevents the employee from transacting with restricted clients regardless of who initiates the contact.
TUPE; restrictive covenants; a variation of contract terms (including restrictive covenants) by the transferee will be void under TUPE Reg 4(4) if the sole or principal reason for the variation is the transfer itself, even if the variation appears beneficial.
Restrictive covenants; know-how; recognised 'know-how' as a distinct protectable legitimate interest, separate from both trade secrets (Faccenda class 3) and client connections. An employer may protect specialist technical knowledge that gives it a competitive edge.
Restrictive covenants; team moves; comprehensive modern review of covenant enforcement principles in a team-departure case. Addressed garden leave credit, springboard injunctions, duties of fidelity, and the interplay between express covenants and implied obligations.
EWCA Civ 1176 - Restraint of trade; non-solicitation; a clause preventing solicitation of clients is valid if reasonable and protecting a legitimate interest.
Restrictive covenants; interpretation; a poorly-drafted covenant that on its natural construction did not cover the activity the employer sought to restrain was unenforceable, the court will not rewrite a covenant to give it a meaning the words cannot bear, even if the parties' intention was clear.
Restrictive covenants; garden leave credit; a 12-month garden leave followed by a 12-month non-compete was enforceable, there is no automatic rule that garden leave reduces the non-compete period. Reasonableness assessed by reference to the overall protection needed.
Restrictive covenants; garden leave; principles governing garden leave injunctions where no express garden leave clause exists, the court may imply a right to garden leave in appropriate circumstances.
Penalty clauses; restraint of trade; reformulated the test: a clause is enforceable if it protects a legitimate business interest and is not exorbitant or unconscionable. Departed from the 'genuine pre-estimate of loss' test. Applied to restrictive covenant forfeiture and liquidated damages provisions.
Restrictive covenants; worldwide scope; a worldwide non-compete clause can be reasonable where the employer's business is genuinely global and the employee operated at that level. Geographic scope assessed by reference to the actual scope of the business and the employee's role.
Restrictive covenants; scope; the employee's actual activities and responsibilities matter more than the contractual job title when assessing the reasonableness of a restriction.
Restrictive covenants; interpretation; where a covenant's wording is ambiguous, the court may construe it narrowly in the employee's favour so as to render it reasonable and enforceable. But will not rewrite it to cover activities plainly outside its terms.
Where a restrictive covenant is ambiguous it will be construed narrowly in the employee's favour. Covenants in restraint of trade are to be construed contra proferentem against the employer who drafted them, and ambiguity will not be resolved in the employer's favour when clearer drafting could have been used.
Restrictive covenants; injunctions; enforced a 12-month non-compete against a senior sales director. Approved blue-pencil severance to narrow an over-broad definition of restricted business. Restraint upheld protecting legitimate trade connections.
Restraint of trade; severance; the Supreme Court held that unreasonable parts of a non-compete clause can be severed ('blue-pencilled') to save the remainder, overruling the CA ([2017] EWCA Civ 1054). Lady Hale: the test is whether removal of the offending words leaves the covenant 'a reasonable restraint' without altering its overall effect.
Restrictive covenants; TUPE; covenants in a contract may need to be read with modifications after a TUPE transfer to reflect the changed identity of the employer. The covenant is not automatically void but must be construed purposively in the new context.
Restrictive covenants in employment contracts must be construed purposively with regard to the commercial context. Where an employee has moved to a materially different sector, the court should consider whether the covenant's purpose is actually engaged, rather than enforcing it mechanically according to its literal terms.
Restrictive covenants; legitimate interest; an employer's late reliance on a different legitimate interest from that originally pleaded can still succeed, the covenant is valid if justified on any legitimate ground, not only the one first advanced.
Confidentiality; delivery-up; ordered return of privileged documents even after they were mentioned in open Tribunal proceedings.
An employer may rely at trial on a legitimate business interest not expressly articulated at the time the covenant was entered into, provided that interest genuinely existed at that time. Late reliance on a different interest does not automatically render the covenant unenforceable.
Breach of confidence; lawful excuse; the Court of Appeal considered the scope of the breach of confidence action in the context of commercially confidential information. The case establishes that a 'lawful excuse' (such as a protected disclosure under the ERA whistleblowing regime) can provide a defence to a breach of confidence claim. Applied in GQA Qualifications Ltd v Clayton to determine whether disclosures made in the course of obtaining legal advice defeated a breach of confidence action.
Restrictive covenants; injunctions; at the interim stage, the court should generally enforce a clear negative covenant by injunction and not conduct a mini-trial on its enforceability, the burden of showing the covenant is unreasonable lies on the party resisting enforcement.
Restrictive covenants; non-compete; a 12-month non-compete in a solicitor's service agreement was upheld as reasonable given the firm's niche market, the difficulty of recruitment and the shelf life of the confidential information she held. The parallel covenant in her shareholders' agreement was too wide and was not enforced.
Restrictive covenants; shareholders' agreements; 18-month restrictions (non-compete, non-solicitation of customers and staff) against a joint managing director in a shareholders' agreement were upheld as reasonable, the court noting his privileged access to a significant amount of confidential information. Covenants in shareholder agreements attract less strict scrutiny than employment covenants.
Restrictive covenants; non-compete; approved 'blue pencil' severance of over-broad definitions of confidential information at the interim stage.
Injunctions; delay; an unexplained 4-month delay in seeking an injunction after garden leave ended was fatal to the application.
Injunctions; procedure; failure to order a speedy trial in a 12-month covenant case was an error of law; such cases demand expedition.
Restrictive covenants; interim injunctions; where a negative covenant is clear and unambiguous, the court should ordinarily grant an interim injunction to enforce it without conducting a mini-trial on the merits. Followed Peninsula Securities.
Restrictive covenants; comprehensive modern review of enforceability principles. Addressed the interplay between non-compete, non-solicitation and non-dealing covenants, and the relevance of seniority and access to confidential information to reasonableness.
Restraint of trade; bonus clawback; a clause requiring repayment of bonus on resignation is a loyalty incentive, not an unenforceable restraint of trade.
Breach of confidence; damages; loss measured by what a 'willing buyer' would hypothetically pay to license the confidential information used.
Injunctions; balance of convenience; interim relief refused where undertakings were sufficient to protect the employer's energy analysis system data.
Fiduciary duties; non-directors; established a 5-factor test for non-director fiduciaries: degree of autonomy, seniority, vulnerability of employer, trust reposed, and scope of duties.
Solicitation; non-solicitation covenants; solicitation can occur via press release or collective appeal, not just direct person-to-person contact.
Non-compete; competition; no breach where a client moved services 'in-house', the client had effectively left the marketplace and was no longer a competitor.