The English High Court was once again required to assess the enforceability of restrictive covenants in the recent case of case of Bartholomews Agri Food Limited v Michael Andrew Thornton. This decision would have persuasive authority in the Irish Courts and so it is important for Irish employers to be mindful of the outcome.
The employer in this case, a supplier of products and services to the agricultural sector, sought an interim injunction enforcing the terms of a restrictive covenant contained in the respondent employee’s employment contract.
The employee, a qualified agronomist, joined the employer in September 1997 as a trainee agronomist. Shortly after commencing his employment, the employee signed an employment contract which contained a number of restrictive covenants. The relevant clause sought to restrict the employee, for a period of six months following the termination of his employment, from working for a competitor within the employer’s trading area without prior approval from the employer. Unusually, the contract also provided that “in this unlikely event, the employee's full benefits will be paid during this period.”
The employee resigned from his employment in December 2015 in order to take up a new position in March 2016 with Pro Cam UK Ltd, which the employer argued was a competitor.
In its application for injunctive relieve, the employer argued that the employee was a trusted advisor to many of its customers and played a key role in maintaining relationships with its customers. The employee argued that that the restrictive covenant was unreasonable, unenforceable and constituted a restraint of trade.
The court held that notwithstanding the fact that it was limited in duration and geographical scope, the restrictive covenants clause was a restraint of trade and was unenforceable.
The court was critical of the fact that the restriction was imposed in 1997 when the employee was a trainee agronomist and held that it was wholly inappropriate to impose such a restriction on such a junior employee.
The court also referred to previous case law which held that a restrictive covenant that was unenforceable at the time of agreement because of the employee's status and role at the time of agreement remained unenforceable, even where the employee was subsequently promoted to a more senior role where the restriction may have been deemed reasonable.
The court held that the restrictive covenants clause was wider than reasonably necessary to protect the employer's legitimate business interests as it attempted to impose a restriction in respect of all of its customers and its associated companies.
The court held that a more appropriate restriction would have provided that the employee could not deal with or solicit customers with whom he had dealings with for a period of time before the termination of his employment for a period of six months.
The court also held that the employer effectively sought to purchase a restraint of trade by seeking to continue to pay the employee for the duration of the restriction on the basis that he complied with the terms of the covenants and that this was contrary to public policy.
Restrictive covenants drafted at the outset of the employment relationship should be reviewed and may need to be renegotiated as the employee's role and the nature of the employer’s business evolve over time. Therefore, it is important that employers carry out regular reviews of employment contracts and restrictive covenants in place for key personnel to ensure that they are fit for purpose.