We provide the complete commercial debt recovery service; from outsourced early arrears collections through to expert litigation, all handled in-house by a multi-award-winning law firm.
We provide the complete commercial debt recovery service; from outsourced early arrears collections through to expert litigation, all handled in-house by a multi-award-winning law firm.
Case Study
In the case of Dare International v Soliman, the High Court issued an injunction against a former employee, finding that a 12-month non-competition covenant was not unreasonable.
This is an interesting case in terms of establishing that a restriction that purports to stop an employee from competing for a full year can be held enforceable. It also tells us about the considerations made by the High Court in making this finding, and also which other types of restrictions for the same period were deemed non-enforceable (and why).
Restrictions on an employee’s activity post termination are void unless it can be shown that they (a) seek to protect a legitimate interest and (b) go no further than is reasonably necessary. Non-compete covenants (such as the one upheld in this case) are the harshest form of restraint and therefore usually the most difficult to enforce.
This was a case dealing in the somewhat specialist market of energy derivatives. The ex-employee against whom the injunction was sought had resigned to join a competitor. There were a number of post-termination restrictions within the contract of employment including non-solicitation, non-dealing and non-poaching. These types of restrictions are often easier to enforce as they are less restrictive and do not stop the employee from working in their chosen field. There was also a non-compete clause that prevented the employee from being employed or involved in any business in competition with any of the employer’s business for a 12-month period.
Case Study
The High Court found that the non-compete covenant was enforceable on the basis that the employer had legitimate business interests in protecting its confidential information and the covenant was no wider than reasonably necessary to protect it.
Interestingly, the High Court found that these “lesser” restrictions (non-dealing, non-solicitation, non-poaching) were unreasonably long and therefore not enforceable. This is perhaps the “other way round” to how we might expect such a case to go, with the lesser restrictions usually being the easier to enforce.
It is important to note that this employer was able to show that they had developed unique trading functionalities which, if relayed to a competitor, would take at least 12 months to replace. In addition, they were able to establish that some of the confidential information would have a “shelf-life” of more than 12 months.
Conversely, the Court concluded that a similar restraint was not necessary for the non-solicitation, non-dealing and non-poaching covenants because the employer could reasonably be expected to rebuild those trading relationships and to recruit and train new personnel, in much less than 12 months.
The Court therefore granted an injunction against the ex-employee for the full 12 months.
Post-termination restrictions are a very specialised area of law and require a lot of preparatory work to draft the clauses to fit the specific situation. We always recommend taking advice before issuing contracts with these types of covenants, ensuring that the wording is specifically tailored to the individual employee, according to their work and the work of the company, the risk and the longevity of that risk.
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