Restrictive Covenants: why you need to take action ASAP, by Liz Watt

Restrictive covenants are used by employers to protect their company brand and trade secrets. Employees who leave the company will remain subject to the restrictive covenants so that they cannot take customers, other employees and suppliers with them and would be unable to work for a competitor, customer or supplier.

The recent case of?Planon Limited v Gilligan?highlights that employers need to take action to enforce the restrictive covenants following an employee leaving the company as soon as possible. In this case, Mr Gilligan left Planon Limited to work for a competitor at the end of his one month notice period. In Mr Gilligan’s employment contract he had a non compete clause which meant that he was unable to work for a competitor for a period of 12 months. The company became aware he was working for a competitor the day after he started work and sought undertakings which were not granted. The company then sought an injunction to prevent him from working for them. The High Court ruled that the non compete clause was unenforceable because it would prevent Mr Gilligan from working for a period of 12 months and the injunction was refused. The company appealed the decision to the Court of Appeal and when the appeal was heard, Mr Gilligan had been working for the competitor for 7 months with only 4 months remaining of the 12 month non compete clause. The Court took the view that if his new role posed such a threat to the company’s customer connections and trade secrets, most of the damage would have been done at the start of his employment. The appeal was dismissed and Mr Gilligan was allowed to continue in his employment mainly because of the length of time that had passed.

If you would like to discuss the enforceability of restrictive covenants in an employment contract to ascertain what you are able to do when you leave or whether you would like to discuss how best to draft restrictive covenants to ensure that your company’s customers, employees and suppliers remain with you please contact?Liz Watt?on 01905 900 949 or via [email protected].