April 29, 2016

Non-Compete Restriction Held To Be Unenforceable

In Bartholomews Agri Food Ltd v Thornton [2016] EWHC 648 (QB), the High Court considered whether a non-compete post-termination restriction was an unlawful restraint of trade.

Bartholomews Agri Food Ltd (Bartholomews) employed Mr Thornton as a trainee agronomist in 1997. His employment terms included a covenant restricting him from competing with Bartholomews for six months following termination of his employment. Unusually, the covenant also provided that Bartholomews would pay Mr Thornton in full during that six month period. Mr Thornton resigned in December 2015 (by which time he was an experienced agronomist) to join a competitor. Relying upon the covenant, Bartholomews applied for an injunction to prevent Mr Thornton from joining the competitor.

The High Court found the non-compete restriction to be unenforceable. Firstly, it found that when first imposed, the restriction had been “manifestly inappropriate” for a trainee agronomist with no customer contacts. The Court highlighted that a covenant remains unenforceable regardless of a subsequent promotion to a role where it could be reasonable. Secondly, the Court found the covenant was wider than necessary to protect Bartholomews’ interests as it sought to prevent Mr Thornton from dealing with “any customer” of Bartholomews, regardless of whether he had had any prior dealings with them. Finally, it found the fact that Bartholomews would pay him during the period of the restriction to be contrary to public policy as it would permit an employer to “purchase” a restraint of trade. In the circumstances, the Court rejected Bartholomews’ application for an injunction.

Employers should ensure that post-termination restrictions are carefully tailored to each employee and their suitability reassessed on promotion.

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