Decorus Ltd v Daniel Penfold & Procure Store Ltd [2016] EWHC 1421 (QB)

This case highlights the importance of providing consideration to employees when introducing or amending post-termination restrictive covenants once employment has commenced.

In 2013 Decorus Ltd amended Mr Penfold's employment contract reducing the period of post termination non-compete and non-solicitation restrictions from nine months to six months. When Decorus subsequently looked to enforce the covenants, Mr Penfold challenged their applicability on the ground that consideration had not been given and therefore no contract could have been concluded (an unusual feature of the case is that Mr Penfold was effectively arguing for the more onerous 9 month restrictions under his old contract, on the basis he believed them too onerous to be enforced). The court found in favour of Decorus, who argued that consideration had been given in the form of a pay rise (even though there was a gap between introducing the new contract and pay rise) and continued employment.

This is another in a line of decisions concerning adequate consideration for restrictions. Regrettably, the authorities do not provide a consistent picture and have been determined on their specific facts. The clear message to employers, however, is that when introducing new covenants, they should leave no room for ambiguity. The associated benefit (consideration) should be clearly associated and better still made expressly conditional upon the acceptance of the amended terms.