This question was recently considered by the English High Court
and while many of us are a little disappointed that the issue has
not yet finally been determined, the Court has thankfully provided
a little more guidance to point employers in the right
In this recent case, an employee who was originally employed as
an Account Manager with a reputable IT software company was
contractually required to comply with a twelve month non-compete
restrictive covenant following termination of his employment.
However, while restrictive covenants may not themselves appear an
unreasonable concept and instead, a necessity to preserve business
continuity, this particular clause prevented the employee from
competing in a similar industry throughout the whole of Europe and
the USA for one year; in other words, a relatively large global
arena for a lengthy defined period.
The issue of whether this covenant (with such a wide global
ambit) was reasonable only came into question following the
employee's termination of employment almost twelve years later.
However, the interesting point to note here is that the employee
(at the time of termination) had progressed the career ladder and
was now a Director, responsible for global account management; a
role which carried a far greater level of responsibility and
provided a much more in-depth understanding and knowledge of the
business than when he first commenced employment some years
Immediately following his resignation from the business, the
Company applied for an injunction seeking to enforce the noncompete
restrictive covenant on the strong belief that the now ex-employee
would commence employment with a perceived competitor (which in
fact, he did!).
In the genuine belief that the injunction would be granted and
the ex-employee prevented from working throughout Europe and the
USA for the duration of one year, the Company was, needless to say,
rather dismayed to learn that the clause was not enforceable. The
Court held that the reasonableness of any restrictive covenant will
be determined by the facts at the time the parties entered into the
contract of employment; consequently, the noncompete clause
preventing the ex-employee from working throughout Europe or the
USA for twelve months following termination could not be justified
based on his status as an Account Manager when he first commenced
employment. It was held that a restrictive covenant which is
essentially void for being 'unreasonable' at the time of
entering into the contract could not subsequently become reasonable
by virtue of a change in circumstances.
The judgment in this case should be a warning to employers;
employees who initially start in relatively junior roles should not
be confined to such wide and stringent restrictive covenants as to
impose such may render them void and unenforceable.
Further, as an employee progresses within an organisation, any
mindful employer would be wise to re-visit the suitability of such
covenants to ensure that they are more appropriate to the level of
role now being undertaken; if not, then again they are likely to be
While it is important to point out that this case has become a
leading authority in the English legal system, there is nothing to
stop a similar position from being adopted by the Tribunals in the
Channel Islands, which tend to accept that such decisions have
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Ministry of Human Resources has recently issued a string of new ministerial resolutions and decrees designed to address gaps in the employment regulatory framework and reinforce existing legislation...
Restraints of trade in the employment contract are quite often not given the attention they deserve until the time comes when the employer is under threat by a former employee and enforcement action is required to protect the business.
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