The High Court has refused to grant an interim injunction by Bartholemews Agri Food Ltd (Bartholemews) to enforce restrictive covenants in the contract of employment of an ex-employee, Mr Thornton.
The Court held that the restrictions were wider than is reasonably necessary for the protection of Bartholemews' business interests. The Court also refused to enforce a clause relating to confidential information within Mr Thornton's contract (Bartholemews Agri Food Ltd v Thornton, HC).
Bartholemews is an agricultural merchant, which supplies goods and services to the agricultural industry. This includes advice on certain agricultural matters.
Mr Thornton joined Bartholemews as a trainee agronomist in 1997, and signed a contract of employment which contained a post-termination restriction, preventing former employees from being: "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 a six-month period from termination. It then set out six counties in which this restriction applied. The contract also contained a clause protecting the confidential information of Bartholemews, but did not define what constituted "confidential information".
Mr Thornton progressed through Bartholemews and became an agronomist. He developed a portfolio of clients, and provided technical advice to these clients, which, from Bartholemews' evidence, they placed "considerable reliance on". Mr Thornton later resigned on 21 December 2015, and declared an intention to join a competitor at the expiry of his notice period.
Bartholemews, therefore, sought to enforce the restrictions in Mr Thornton's contract.
High Court's decision
The High Court rejected the application to enforce the restrictions on the following grounds:
- The restrictions relied upon by Bartholemews were imposed on Mr Thornton in 1997, when he was a trainee agronomist, and had no practical experience, or client contacts or relationships. The Court stated that these restrictions were: "wholly inappropriate for such a junior employee", and, applying Pat Systems v Neilly, held that a restriction that is unenforceable at the time of its imposition remains unenforceable regardless of whether the individual in question becomes more senior (and the restrictions would appear legitimate when viewed at a later date).
- The restrictions were also far wider than was reasonably necessary to protect Bartholemews' business interests. The clause in question applied to all of Bartholemews' customers, as opposed to those with whom Mr Thornton had close personal dealings. As Mr Thornton's contribution to Bartholemews' turnover was around 1%, the Court held that this restriction was far too wide.
- The Court was not persuaded by the significance of a part of the restriction that allowed for Mr Thornton to receive his normal salary during the period of the restriction (six months), even if he had found work elsewhere in this period. It would be against public policy, the Court stated, to allow an employer to "purchase a restraint".
- The Court also refused to enforce the confidentiality clause in Mr Thornton's contract. There was no definition of 'confidential information' in the contract, nor was there any limitation of such information to business or trade information.
This decision reinforces the well-established principle that post-termination restrictions should be no wider than is reasonably necessary to protect a legitimate business interest. The restrictions should be closely tailored to the day-to-day interaction of the individual with sensitive business information (including clients and customers).
It must be remembered that junior employees are likely to have less substantial interaction with such information, and are unlikely to have well-developed relationships with clients or customers. Therefore, avoid imposing restrictions on junior employees, unless their situation requires it (e.g. if they interact closely with sensitive business information or relationships). As individuals progress through the business and gain promotions, have them enter into proportionate restrictions that are relative to their new seniority, and keep all restrictions under review as circumstances change.
Any restriction relating to clients or customers of the employer should be restricted to those clients and customers with whom the individual has had personal dealings. Restrictions that are wider (without a legitimate basis) are more likely to be unenforceable.
Finally, confidentiality clauses should be closely linked to business and/or trade information, and a clear and thorough definition of what constitutes this information should be set out in every confidentiality clause.