In Associated Foreign Exchange v International Foreign
Exchange (UK) and Abbassi the High Court refused to grant an
interim injunction to enforce a post-termination restrictive
covenant in a contract of employment.
The contract was terminable on two months' notice but also
contained a 12 months post-termination non-solicitation
covenant. The contract allowed the employer to put the
employee on garden leave rather than allowing him to work through
his notice period. Further, it provided that the restricted period
in the covenant would then be reduced by the amount of time spent
on garden leave.
Factors that the court took into account were –
- The claimant was a relatively junior employee
- Client contracts mostly lasted for four months or less
- There was no customer loyalty and it was a highly competitive market
- His new employer said that a six months non-solicitation covenant was more usual in this type of business
In these circumstances, the court said that the extent and
duration of the 12 month covenant was too wide to be
enforceable.
Point to Note –
- The court accepted that the employer had a legitimate business interest to protect and that the claimant had breached the covenant. It also accepted that it would have been equitable to grant relief had the covenant not been too widely drafted. Employers should take legal advice to ensure that the wording of any restrictive covenant is appropriate to the circumstances. A post-termination covenant is a useful commercial tool but only legally enforceable if reasonable in extent and duration.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.