This article was published on July 12th, 2016
Do you keep employees’ restrictive covenants under review? As business needs and other circumstances change, you could find that covenants become unenforceable. But in Bartholomews Agri Food v Thornton, the High Court held that a restrictive covenant that wasn’t enforceable to begin with didn’t become enforceable when the employee was promoted to a role that would justify a restriction along those lines. In other words, enforceability is judged as at the time the contract is signed.
For Mr Thornton, that time was at an early stage in his career when he was a trainee agronomist. In his contract was a clause that read:
“Employees shall not, for a period of six months immediately following the termination of their employment be engaged on work, supplying goods or services of a similar nature which compete with the Company to the Company’s customers, with a trade competitor within the Company’s trading area, (which is West and East Sussex, Kent, Hampshire, Wiltshire and Dorset) or on their own account without prior approval from the Company. In this unlikely event, the employee’s full benefits will be paid during this period.”
An inappropriate restriction to place on a trainee agronomist and unenforceable, said the High Court. And even though, by the time Bartholomews wanted to rely on the clause, Mr Thornton was a full-fledged agronomist, that didn’t convert the clause into a reasonable, enforceable one. Aside from the fact that the clause was still too widely drafted to work, it was unenforceable at the beginning and it remained unenforceable, regardless of Mr Thornton’s promotion.
A stark warning, then, that not only do you need to get your covenants right to begin with, but you should review them periodically and as employees rise through the ranks.