Decision: The High Court held that a restrictive covenant which sought to prevent a former employee from working for a competitor for six months following the end of his notice period was not enforceable. The covenant was too widely drawn and went beyond protecting the legitimate business interests of the employer. It was therefore in restraint of trade. In reaching this decision, the Court also held that the employee was not on garden leave during his notice period, with the result that a provision in the contract allowing the period of restraint to be reduced by time spent on garden leave did not apply.
Impact: The temptation when drafting a non-competition clause might be to ensure that it is as comprehensive as possible. This case illustrates that this approach may lead to a clause that cannot be enforced at all by the employer. When drafting noncompete restrictive covenants, clauses should focus on activities which would involve the employee directly competing with their old employer. By being drafted more widely than that, as was the case here, an employer risks rendering a non-compete restrictive covenant useless (although it may still be possible to rely on various non-solicitation and confidentiality clauses).
It is a relatively common contractual term to allow an employer to put an employee on garden leave or to give them alternative roles or alternative work during a notice period. Employers are generally well aware that they cannot give an employee manifestly unsuitable or demeaning work as an alternative to garden leave. However, it would be a worrying trend if courts were to start finding that restrictive covenants, which apply in respect of areas of business undertaken by an employee during the last twelve months of employment, are rendered invalid because an employee can be asked to work in a different area of the business during the notice period. Although this case does not go this far, it may be that arguments along these lines are developed in subsequent cases.
Ashcourt Rowan Financial Planning Limited v Hall