Wide scope of restrictive covenant was enforceable
Employers will often include post - termination restrictions in their contracts of employment. Typically these cover the misuse of confidential information and a prohibition on the employee working for a competitor or soliciting clients or staff.
For such restrictions to be enforceable two key elements have to be satisfied.
- That the restriction protects a legitimate business interest and
- It goes no further than is reasonably necessary to protect that legitimate interest.
If an employer cannot identify a legitimate interest or show that the restriction goes no further than is reasonably necessary, it will be void and a court will not enforce it.
In an interesting decision of the Court of Appeal in Coppage and another v Safetynet Security Ltd (October 2013) the issue in dispute was the enforceability of a six month non-solicitation restrictive covenant.
In 2008, Mr Coppage commenced employment with Safetynet and he was asked to sign a new contract when he became a director two years later. The contract included a restrictive covenant which prevented Mr Coppage, for a period of six months from the termination of his employment, from soliciting any individual or organisation that had been Safetynet’s customer during his period of employment. In April 2012, Safetynet began redundancy consultations with Mr Coppage who resigned. It appeared that he had also induced another employee to resign. That employee, Mr Hadley, then set up a competing business but Mr Coppage was actively involved in it and successfully induced five of Safetynet’s customers to move their business to the new company.
It transpired that Mr Coppage had made 135 calls and sent 175 texts to those customers after his resignation.
The Mercantile Court ordered Mr Coppage to pay at least £50,000 damages to Safetynet for breach of the non-solicitation clause and his fiduciary duty. Mr Coppage appealed arguing that the non-solicitation clause was unreasonable and too wide to be enforceable. It prevented him from approaching anyone who had been a customer whilst he was a director. Instead, the clause should have been limited to customers within a specified period of time, for example, the last 12 months of his employment.
The Court of Appeal disagreed. What was particularly relevant was that the non-solicitation clause was for six months only and this was "a powerful factor in assessing the overall reasonableness of the clause."