HR Briefing - July 2026

Welcome to our briefing for HR teams and in-house employment counsel – bringing you this month’s employment law highlights in an easy-to-read package.

In this edition we're going to focus on three recent cases looking at different aspects of post-termination restrictions, or PTRs. PTRs are typically grouped into non-competes (that prevent working for a competitor), non-solicits (that prevent active targeting of former clients or customers), non-deals (that prevent dealing with a former client or customer whether targeted or not), and non-poaches (that prevent targeting former colleagues). As readers will no doubt already know, all PTRs need to be viewed through the lens of the restraint of trade doctrine, a long-standing common law rule that prohibits any restriction on a person's ability to ply their trade unless the restriction is reasonable to protect a legitimate business interest. The interests the courts usually accept are protecting confidential information and protecting the investment made in clients and employees.

The problem of group companies

The first case we're going to look at turns on a short but important piece of legislation: s.6(3) of the Contracts (Rights of Third Parties) Act 1999. English common law has always recognised that only the parties to a contract can enforce its terms, save for some very exceptional circumstances. The Act changed the common law position, so that third parties who were clearly identified in a contract, or granted benefits under it, could also enforce its terms. So if I promise Mabel to do some painting for Lance, and Mabel pays me, Lance can sue if I fail to turn up. However, this reform does not apply to employment contracts, by virtue of s.6(3). Where an employee is employed by Company A but works for a number of group companies, that can pose a real problem. The section prevents group companies from enforcing directly, so the conventional solutions are either to express the restriction as being for the benefit of the group companies and in trust for them and/or to require the employee to enter into parallel restrictions direct with the group company on request.

In this case, the question was whether the section was relevant for an independent financial adviser. They were engaged on paper as a self-employed contractor, but the Court found that, in practice, the tests for "worker" status (an intermediate status between employee and the genuinely self-employed) were satisfied. As the section is drafted to prohibit enforcement by a third party of a worker's contract, the group companies in this case could not enforce the PTR. The group companies' second argument, that the PTR was a benefit under a trust, did not work because the drafting adopted was not clear enough to create a trust. It remains possible in theory to draft a clause that could do so, so the conventional drafting solutions remain on the table. The key takeaway, though, is to line up employment with the entity that actually has the interest you are seeking to protect.

Indirect restrictions: repayment clauses

Organisations very often need to train their staff. That is not just at the junior end, where new recruits are being trained in a role. More senior staff are sometimes sent on MBAs, or other professional courses, which represent a significant investment by their employer. Clients will typically want a return on that investment, so will require some or all of the training costs to be repaid if the employee leaves before some part of the value of the training has been recouped. From a PTR perspective, the question is whether a repayment provision operates as an indirect form of restraint so as to engage the restraint of trade doctrine and, if it does, whether it is reasonable to protect a legitimate interest.

The Court of Appeal has given an important judgment looking at some of these issues. As always with PTR litigation, the facts are very important in determining the outcome. Here, a young graduate started working for an IT firm. The salary was around £18,000, with the intention that it would increase to £20,000 and then £22,000 over the next two years. The new joiner signed an employment contract and a separate training agreement, under which he promised to repay the notional costs of the training he would receive in his first years at the firm. A methodology setting out those costs was included, one element of which was the hourly cost of their work mentor. The total cost was just over £8,000, and was payable in all circumstances save for compulsory redundancy, whether the individual went to work for a competitor or not. The structure was unusual: the employee could either work off the training debt by staying for 30 months, or, if they left before the debt was settled in that way, by paying the balance over 18 months. The drafting recited that the clawback mechanism was not designed to prevent the employee from working elsewhere, and noted that they had had the chance to seek legal advice.

The employee duly decided to take better paid work elsewhere, and the employer sought repayment of the training debt. It succeeded in the lower courts, but the Court of Appeal took a different view. First, it decided the clawback scheme was caught by the restraint of trade doctrine. Even though it did not strictly prevent the employee from working elsewhere, it operated as a punitive disincentive to do so. The level of salary, as against the repayment, is relevant here. Second, the Court accepted, without formally deciding the point, that getting value for training investment and securing the stability of a workforce are potentially legitimate interests for an employer to seek to protect. Third, again having regard to the level of salary and repayment, this clause was unreasonable and so unenforceable. Had full repayment been ordered, it would have effectively meant reducing the employee to an unpaid intern well below the minimum wage. Also relevant were the facts that the clause was triggered whether or not the employee went off to work for a competitor or left to care for a sick relative. That, said the Court, was unreasonable. The recitation of the fact that the employee had been given the chance to take legal advice before signing was, said the Court, irrelevant when he had not in fact been able to afford to take professional advice. Although the sliding scale of repayment helped in the assessment of reasonableness, it was not enough, and so the clause failed.

The case is a reminder to look carefully at training clawback mechanisms. Not all training recovery schemes will fail, and a proportionate mechanism should still be capable of justification. The key is not to overreach, and to appreciate that where the restraint of trade doctrine is engaged, the onus is on the employer to justify the clawback. Factors such as ensuring the employee actually takes advice, linking the recovery to actual costs, having a sensible tapering system, and thinking about whether the reason for an employee's departure makes a difference will all be relevant.

PTRs and probation

The last case for this edition is a good example of a PTR – a six-month non-compete – that failed comprehensively. Part of the judgment turns on the specific wording: the drafting was poor and could not be saved by severing the offending provisions. Of more general importance were the Court's comments on probation and on client contacts. Here, the non-compete was in the employee's contract from the start, even during probation. That, with respect to the Court, is extremely standard. Employers will anticipate new starters being fully engaged from the off, being involved with clients and key projects as soon as induction has finished. They will therefore want to protect their confidential information and client connections immediately, even where the new starter is still in probation and/or capable of being dismissed on short notice. That is all perfectly natural and, in many cases, uncontroversial. In some cases, however, the courts have disapproved of PTRs applying from the outset of employment, on the basis that a departing employee who has only been in the business for a relatively short period requires less protection, as they will have had less of an opportunity to build a meaningful relationship with clients, even if they have had access to client-related documentation. In this case, noting again that the onus is on the employer to show the clause goes no further than necessary, the Court was unpersuaded.

The second point of general interest deals with the ownership of client data. It is well settled that some client data – where it is genuinely confidential and/or held in a database that involves some effort to compile – can be confidential and protectable. Some businesses go further and, recognising that LinkedIn (amongst other platforms) allows virtual networking, gives publicity and acts as a client database, seek to control their employees' use of those platforms. Control is relatively common in the sense that a social media policy in a staff handbook might contain restrictions on what can and cannot be posted, and on when approvals for posts might be required. Much less common is the attempt to control an employee's list of LinkedIn contacts when they leave. Here, the employer sought to compel the employee to delete former clients from his LinkedIn network. The attempt failed. Whether it is actually possible to make that sort of deletion stick before the courts remains open to doubt, even if the drafting had been better than in this particular case.

Two other non-PTR updates

There are two other updates to flag. The first is relevant to LLPs with salaried members. The Supreme Court has handed down its judgment in the long-running Bluecrest litigation. Our Tax team's full analysis is available in our article.

The second update is that the Data (Use and Access) Act 2025 has now come into force. The ICO has a useful guide to the Act, but the most immediate impact for employers is that they must now have a complaint mechanism in place. The mechanism must give data subjects a simple way of raising complaints (e.g. a complaint form), and must deal with complaints without undue delay. The ICO has guidance on how to deal with data protection complaints.

Macfarlanes is a pre-eminent law firm advising a global client base across Private Capital, Private Wealth, M&A and Disputes.

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