In an interesting decision, the High Court upheld an eight month non-compete clause and refused to reduce the period of restraint to take account of the three month notice period that the employee had spent on garden leave. The High Court judge held that:
"A total of 11 months is not in my judgment an excessive period. Any period is to some extent arbitrary, and periods of up to 12 months are commonly upheld by the courts….. In my judgment the restrictive covenants are valid and enforceable".
Key to the decision was the fact that the non-compete clause was drafted to run for a period of "8 months after the termination of employment" and there was no contractual provision permitting a set-off with the garden leave period. (ExtecScreens & Crushers Ltd v David Rice)
In practice, many service agreements do provide for the period of post-termination restrictions to be reduced by any period spent on garden leave to increase the likelihood that the overall period of restraint will be considered to go no further than reasonably necessary to protect the company's legitimate interests. These types of cases are highly fact-sensitive. Although, where the overall period will be less than 12 months, there may be an argument that there is no need to provide for the post-termination restraint to be reduced by any period on garden leave, our view is that this is taking an unnecessary risk. The difficulty is that if, say, a six month non-compete clause is considered to go no further than reasonably necessary when it operates immediately from the termination date, how can it also be said to be reasonable when it follows a period of three months' garden leave? Further, whilst the High Court, in this case, commented that the courts often uphold periods of restraint up to twelve months, it is, in our experience, rather exceptional for a twelve month non-compete provision to be upheld (although such a clause was recently upheld by the Court of Appeal in Thomas v Farr plc in which we successfully acted for the employer).