Restrictive Covenants

What are the 4 categories of restrictive covenants?

1. Non-competition clauses (cant work for competing company) 2. Non-solicitation clauses (can't solicit clients) 3. Non-dealing clauses (can't deal with clients) 4. Anti-poaching clauses (can't poach staff).

What does Living Design v Davidson state?

Clause not valid where the termination of employment was unlawful

What does a legitimate business interest consist of?

Connections with clients and suppliers. Stability of work force Trade secrets and confidential information.

Who needs to justify the clause?

Countywide Assured Financial Services Ltd v Pollard: it is for the employer to justify the clause and convince the court it should be upheld.

Is the presumption against validity rebuttable?

It is, but it must fulfil the criteria the courts set out: 1. Employer must have a legitimate business interest which requires protection. (Faccenda Chicken) 2. The covenant is reasonably necessary to protect the legitimate business interest and goes no further than reasonably necessary. 3. The clause must also be reasonable between the parties (Herbert Morris v Saxelby).

What is meant by reasonable between the parties?

Need to consider the nature of their work and what access to information they have. For example if you are the cleaner at a big company, you would not have access to information and it would be unreasonable to restrict you beyond employment.

What does General Bill Posting Company Ltd v Atkinson state?

That the employer cannot rely on a clause they have already broken themselves.

What is a PILON clause?

The employer can pay them the notice rather than the employee serving the notice. This can be useful where top secret plans are going to be going ahead and you do not want that member of staff to know them.

What is an anti-poaching clause?

You cannot poach employee's from your former employer, and take them with you to your new place of employment. But, this depends on how wide the clause is drafted. Havover Insurance Brokers Ltd v Schapiro: "any employees" was too wide. Dawney Day & Co Ltd: "senior employees" was upheld.

What is a mobility clause?

An express clause which allows employers to move their employees to other geographical locations. O'Brien v AFA: wont be implied where there is absence of an express one. EXCEPTION: Aparua v Iceland Frozen Foods: can be implied where it is no more difficult for the employer to get there. United Bank v Akhtar: Can't be imposed where they breach the implied term of trust and confidence.

What is a restrictive covenant?

An express clause which restricts an employees beyond their employment, after it has came to an end. It is linked with the duty of fidelity and confidentiality.

What is a flexibility clause?

Express terms that state from time to time an employee may have to perform duties beyond those in their contract. These can be implied too (Cresswell v Inland Revenue).

What is unreasonable between the parties?

Greer v Sketchleys Ltd: Any UK business for 12 months was too wide and not valid. In Contrast... Littlewoods v Harris: the whole of the uk was valid to protect their legitimate business interests. Nordenselt: Worldwide restraint was upheld. So it depends on the business and the circumstance. Office Angels v Rainer: 1km radius not applicable to a street with a large number of recruitment agencies.

What is the blue pencil rule?

If a clause fails, the court will not re-write it to make sense of it. if it is unreasonable it will be struck out all together. There is an exception though: Nordenselt: If part of the clause can be severed to make sense of it, then the rest of the remaining clause can be upheld.

What is a garden leave clause?

The employer can send you to serve your notice away from employment (in the garden), so that even though the employee is still employed they do not have access to confidential information. The info they leave with will no longer be valid. Courts like these because both the employer and employee are still under the duty of fidelity. GFI Group Inc v Eaglestone: 20 weeks rejected. Evening Standard Co Ltd v Henderson: 1 year accepted.

What is the presumption against validity?

The starting point is that there is a presumption against validity of all restrictive covenant clauses. Especially where the employer is simply trying to prevent competition.