Here is a question for you – do you know what an agronomist is? Anybody?
Well, he/she applies the science and technology of producing and using plants for such purposes as food, fuel, and soil management. Well done if you got that. If not, you heard it first at the Employment Law Worldview blog.
I mention the agronomist because of a recent restrictive covenant case involving such a fellow and his agricultural merchant ex-employer. Bartholomews Agri Food Limited v Michael Andrew Thornton is about a company attempting to bring an injunction against its former employee as a means of enforcing restrictive covenants and failing for reasons entirely within its own control.
Mr Thornton worked with the company for 18 years, beginning at trainee level. His contract of employment (entered into when he started as a trainee and not updated since) contained a covenant preventing him from engaging in “work, supplying goods or services of a similar nature which compete with the company to the company’s customers, with a trade competitor within the company’s trading area… or on [his] own account without prior approval from the company” for six months after the termination of his employment. There was also a provision that BAFL would pay him in full during the 6 months of the restriction, even if he got another (not-competing) job during that time, a common provision in parts of continental Europe but very rare in the UK.
When he quit, Bartholomews understandably did not want Mr Thornton encroaching on its business and so sought to enforce this restriction by means of an injunction, relying on its customer connections and confidential information as protectable interests.
This got off to an inauspicious start, with the Judge declaring that these provisions “have not been well drafted”, never an easy moment if you are represented in Court by the lawyers who drafted them. Gritting his teeth, he persevered and quickly found the restrictive covenant to be in restraint of trade and unenforceable. It had been imposed on the agronomist when he was a trainee, at a time when he had no experience or customer contacts to protect, and so such terms were “manifestly inappropriate for such a junior employee”. If the restrictive covenant was unenforceable when entered into, it remains so even if promotions or other changes in circumstances subsequently make it appear reasonable. Sadly the reverse is not true – if it was reasonable when entered into, changing circumstances can still render it not so by the time it comes to enforcing it.
The Judge also found the restriction to be wider than necessary, as it included all customers of Barts and its associated companies, whether or not Mr Thornton had ever worked for them or even knew of them. He was responsible for just over 1% of the Group’s turnover so it was hardly reasonable to restrict him from the customers that made up the other 98% with whom he had no connection at all.
The confidential information point was also dismissed as there was no evidence as to the specific confidential information that Mr Thornton was alleged to have, as opposed to the admitted product of 18 years of general agronomy experience, skill and knowledge. The fact that he was paid during the period of the restriction drew a particularly short response. The Judge simply found it contrary to public policy that an employer could in effect purchase a restraint. This is a harder line than taken in some other cases where payment for the restriction period has not been determinative but was certainly still relevant to whether the restraint works too onerously on the former employee.
While this is not a ground-breaking decision, it is a good reminder of the pitfalls of restrictive covenants.
Lessons for employers
Here are some important tips when you are considering your restrictive covenants, both when imposing them and enforcing them:
- Don’t impose a blanket restriction across all customers/suppliers of your business; this will be much too wide. Ensure instead that the restriction applies to a more reasonable collection of customers, usually those with whom the employee dealt in a set period prior to his departure.
- Don’t impose unreasonable restrictions on more junior employees assuming that they will ‘grow into’ their restrictions when they have been promoted. The enforceability of covenants will be determined as at the date they were entered, not just when you try to enforce them.
- Do be seen to consider the restrictive covenants at any time that an employee is promoted or entering new terms. Changed circumstances may allow you to ‘upgrade’ the restrictions as an employee becomes more senior, or may give you the opportunity to repair older restrictions that you worry may not be enforceable.
- Do ensure that your restrictive covenants are very clear about what they are meant to protect. What is confidential information in the context of your business? Who are the key employees you do not want solicited? Who are the customers the employee cannot approach? Is the period of restraint reasonable? – better something shorter than you would ideally like than something longer but consequently unenforceable.
Don’t assume that paying an employee during the period of his restriction will guarantee the enforceability of it. However, remember that if you have the option of garden leave, this can effectively take an employee off the market for the length of his notice period without worrying so much about enforceability. It is therefore helpful to have garden leave clauses in employment contracts too and to use them.