Tenon FM Limited v Cawley (High Court)
The High Court has emphasised that where an employer wishes to vary an employment contract to incorporate more onerous post-termination restrictive covenants, it is advisable to ensure it has evidence of valid consideration for the change and should always ensure it obtains proof of agreement from the employee; ideally in the form of signature. Any unreasonable conduct from employers when seeking interim relief can also reduce chances of success.
An employee worked for a large cleaning company from May 2008 until her resignation in May 2018. During this ten-year period, the employee's employment contract was varied twice to contain more onerous restrictive covenants. These amended contracts confirmed that they would only be effective from their date of signature; but there was no evidence that they had ever been signed. In August 2018, the employee was suspected of attempting to solicit an ex-colleague on behalf of her new company, itself a competitor. Her previous employer promptly applied for interim injunctive relief to enforce her amended post-termination restrictive covenants and prevent such damaging conduct.
The High Court dismissed the application on numerous grounds, but placed significant weight on the fact that: (i) the ex-employer was not able to prove affirmative agreement with the covenants by way of a signed contract; and (ii) there was no identifiable, adequate consideration flowing in exchange for entering into the more onerous restrictions. The Court also criticised the disproportionate costs incurred in seeking the injunction, and the inequitable, aggressive way in which it had been pursued; including the insistence on unreasonably short (12 hours) and arbitrary deadlines to respond to letters before action.
This case not only highlights the importance of ensuring – through effective HR administration – that evidence of valid agreement to post-termination restrictions is in place, but also reiterates that any perceived unreasonable conduct on the part of an employer leading up to or during proceedings for injunctive relief can have implications on prospects of success. Careful strategy planning before pursing individuals aggressively is essential.