Those clients who attended our recent seminar on post-termination restrictions will be aware of the importance of drafting these restrictions with great care. As explained at the seminar, any ambiguity in the wording of a restriction will be interpreted against the party who drafted it, so an employer seeking to rely on such clauses should make their meaning very clear. Post-termination restrictions, especially non-compete clauses, are onerous obligations; they interfere with a departing employee’s ability to earn a living. The wording of the restriction should be such that the employee should be able to know with absolute certainty exactly what he can and cannot do.
Even if the clause is clear, it may still be struck out. If the Judge’s view is that the restriction is too onerous, then they will simply strike out the clause. They will not re-write it to something that they consider would be reasonable. The only exception to this is the “blue pencil test”, named after the Victorian method of making tracked changes on a document. A Judge may delete some words or entire clauses with his metaphorical blue pencil. If what remains makes sense, and is not an excessive restriction, then clause will be allowed to stand. However, under this rule a Judge can only strike words out, he cannot introduce new wording or re-write the relevant provision.
The recently reported case of Prophet plc v Huggett is a surprising exception to this rule. In this case, Mr Huggett left his employer Prophet plc, a software company, to work for a competitor. He had a non-compete covenant in his employment contract, but due to an error in the drafting the wording of the covenant made no sense. It prohibited a departing employee from working in a competing business “in connection with any products …which he was involved whilst employed”. An employee would only have been involved in working with Prophet’s own software products. On leaving to join a competitor, they would of course not be working on the same products, but perhaps equivalent competing products of the new employer. This is what the non-compete clause had been intended to cover, but the mistake in the drafting meant that, on a literal interpretation, the clause offered no protection whatsoever.
One might have expected the Judge to refuse to amend the clause. It had been drafted by the employer, and therefore it was their mistake that the restriction did not work as they had intended. The Judge could not strike out some words and make the clause effective. However, in this case the Judge was prepared to amend the clause by adding the words “or similar thereto”, thereby widening the restriction to cover software products similar to Prophet’s. This effectively stopped Mr Huggett going to work for a direct competitor. The Judge felt able to make this change because the wording he introduced reflected the “true” meaning of the clause, being what the parties actually had in mind when they agreed the clause.
The reason for the Judge’s willingness to be flexible in his interpretation of the non-compete clause in this case becomes clear when one reads the judgment in full. The Judge was obviously not at all impressed with Mr Huggett, and the judgment is littered with comments about his dishonest conduct when leaving Prophet, and when giving his witness evidence before the Court. In cases where one party has shown themselves to be dishonest, especially if they have lied to the Court, then the Judge may well be prepared to bend over backwards to reach a decision that produces a “fair” result for the other side.
Does this case mean good news from employers, who may be able to rely on the courts taking a purposive approach to interpreting restrictive covenants in future? Probably not; this is just one case and it is a first instance decision, meaning that it has not been approved by a higher court like the Court of Appeal or Supreme Court. It would be unwise to rely on this case, except as a last resort. The best advice is still to take very great care in drafting restrictive covenants to ensure that they are correct, clear and enforceable.
Another matter that was discussed at our recent seminars was the decision whether or not to place a departing employee on garden leave for their notice period. There are pros and cons with both options, but either would have been preferable to the Prophet’s decision in this case, which was to agree that Mr Huggett could leave immediately without working his notice period at all, either in the office or at home in the garden. Prophet only thought to ask Mr Huggett for confirmation that he would abide by his restrictive covenants after it had already agreed to let him go. Maybe they could have avoided this litigation entirely if they had simply put Mr Huggett on garden leave.
Prophet plc v Huggett  EWHC 615 (Ch)