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Case law: Employer's restriction on ex-employee dealing with its customers was too wide and unenforceable

Employers should review any restrictions in employees' terms of employment, including restricting dealings with former customers, to ensure they protect a legitimate interest and are no wider than reasonably necessary - or risk them being unenforceable.

Legal Alert

This update was published in Legal Alert - May 2016

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

Restrictions in an employee's employment contract prevented him from dealing with any of his employer's customers, and those of associated companies, for six months if he left. The restrictions applied whether or not he had dealt with, or even knew of, a particular customer while employed.

Such restrictions must protect a legitimate interest of the employer, for example, preventing poaching of customers or staff, and protecting confidential information. In addition, each restriction (taken together with any other covenants and undertakings) must be no wider than reasonably necessary to protect that interest, or they will be unenforceable.

Despite having been employed for 20 years, the employee in this case had only worked with customers representing some 2 per cent of the employer's turnover. When he left, he argued his employer's restriction was wider than reasonably necessary and unenforceable, as it prevented him dealing with customers representing the other 98 per cent of the employer's turnover.

The High Court agreed and said the employer had failed to show the restriction was no wider than reasonably necessary, and the restriction was manifestly unfair. It made no difference that the employee's contract provided that he would be paid in full for the six-month period, as this would allow the employer to 'purchase' unlawful restrictions - which would be against public policy.

Operative date

  • Now

Recommendations

  • Employers should review any restrictions in their employees' contracts of employment against dealing with former customers, using or disclosing confidential information or approaching former colleagues, to ensure the restrictions protect a legitimate interest and are no wider than reasonably necessary - or risk being unable to enforce them.

Case ref: Bartholomews Agri Food Ltd v Thornton [2016] EWHC 648

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

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