The High Court has held in PAT Systems v Neilly [2012] EWCH 2609 (QB) that the enforceability of a restrictive covenant is to be judged at the time it is entered into and not at the time of enforcement, unless that is the unequivocal contractual intention of the parties.  

Mr Neilly signed a contract with PAT Systems in 2000.  His contract included a restrictive covenant preventing him from working for any competitor of PAT Systems for 12 months after termination of his employment.  Mr Neilly was promoted in 2005 and signed a letter agreeing that his old terms and conditions would apply to his new position, apart from amended duties and remuneration.  Mr Neilly was dismissed in 2012 after accepting an offer of employment with a competitor and PAT Systems sought to enforce the non-compete restrictive covenant.

The Court confirmed that a 12 month non-compete clause could not be justified for an employee of Mr Neilly's status when he joined PAT Systems in 2000. PAT Systems argued that the reasonableness of the clause should be judged in light of Mr Neilly's position in 2005, following his promotion. The Court held that for the clause to be enforceable after Mr Neilly's promotion, he would have had to either (a) have expressly agreed to that specific clause or (b) have signed a fresh employment contract including that specific clause.  As Mr Neilly had done neither of these things, the Court held that the clause could not be re-interpreted to make valid a term that had been unenforceable when Mr Neilly initially entered into his contract with PAT Systems.  Careful drafting is therefore vital at the outset of an employment relationship and this should be reviewed regularly, particularly on promotion.