The Court of Appeal has held that a 6 month non-solicitation of customers covenant was enforceable, even though it prevented an employee from soliciting anyone who had been a customer of the employer at any time during the employee's employment.
Post termination restrictive covenants will only be enforceable if they go no further than necessary to protect the legitimate interest of the company. For this reason, it is common when drafting clauses which prevent an employee from soliciting customers, to limit the restricted customers to those which the employee had direct contact with in a defined period, e.g. 12 to 18 months before termination.
Coppage and Freedom Security Limited v Safetynet Security Limited
Mr. Coppage was the Business Development Director at Safetynet, where he had been employed since 2008. His contract of employment contained a non solicitation covenant which restricted him from "approaching any individual or organization who has during your period of employment been a customer of Safetynet, if the purpose of such an approach is to solicit business which could have been undertaken by Safetynet" for six months after termination.
Mr. Coppage resigned and joined a new company Freedom Security. Over a short period of time, five customers (equating to around five percent of Safetynet's total customer base) left Safetynet indicating that they would be moving to Freedom Security. Safetynet successfully brought a claim against Mr. Coppage and Freedom Security in the High Court for breach of the non-solicitation covenant. Mr. Coppage and Freedom Security appealed against the High Court's decision on the basis that the non-solicitation covenant was too wide to be enforceable as there was no backward looking time restriction.
The Court of Appeal rejected this argument. In doing so, the Court emphasized that the covenant was for "only six months" post termination, which was a "fundamental consideration of reasonableness". It also took into account that Mr. Coppage was the "face" of Safetynet during his employment with them and that he had contact with all of Safetynet's customers, therefore he realistically had the power to influence all customers with whom he had come into contact, both current and past. In the circumstances, the covenant was reasonable.
This case is a helpful reminder that each case will turn on the individual facts of each case looking at the nature of the employee's role within the business in question. The Court emphasized that restrictive covenant cases need to be determined on their own facts and looking at previous decisions is of limited assistance. In this case, Mr Coppage's unique position in the company to influence its customers and the short duration meant that the covenant was enforceable even though it was not explicitly limited to customers he had dealt with, or dealt with recently. Employers should generally continue to limit non-solicitation covenants to those customers with whom an employee has had recent contact.