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Case law: Ruling makes it easier for employers to agree changes to post-termination restrictions with employees

Employers proposing to ask existing employees to agree new post-termination restrictions could argue that simply keeping them on as employees is sufficient benefit to make the restrictions enforceable, following a recent ruling.

Legal Alert

This update was published in Legal Alert - July 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.

Two trainee scientists were asked to sign fresh contracts of employment. The new contracts contained restrictions stopping them from soliciting or dealing with their employer's clients for six months if they ceased to be employed.

Both later resigned and went to work for a competitor, and asked the court to declare that the restrictions were invalid.

According to previous court rulings, changes to restrictions of this type were only enforceable against an existing employee if the employer had given the employee a tangible benefit, such as a pay rise, bonus or promotion, in return. Their argument was that no such benefit had been given in this case, so the restrictions were unenforceable.

The court refused to make the declaration, ruling that the employer had given the employees a benefit in return for imposing the new restrictions. The benefit was continued employment and, therefore, access to its clients and confidential information so they could progress their careers. It also found that their employment might have been terminated had they refused to sign. The restrictions were therefore enforceable.

Operative date

  • Now

Recommendations

  • Employers proposing to ask existing employees to agree new post-termination restrictions should consider whether simply keeping them on as employees may be sufficient benefit to ensure that the restrictions are enforceable

Case ref: Pickwell & Nicholls v Pro Cam CP Ltd [2016] EWHC 1304

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