The High Court has held in FW Farnsworth Ltd v Lacy that an employee was bound by the restrictive covenants contained in an updated contract of employment, even though it had not been signed and returned.
Mr Lacy started work at FW Farnsworth Ltd in 2000. In 2003 he signed a contract which did not contain any restrictive covenants (the 2003 Contract).
In 2009 Mr Lacy was promoted to a senior management position and was sent a new contract which contained post termination restrictive covenants, as well as additional benefits including the right to join the pension scheme and to apply for private medical insurance (the 2009 Contract). Although Mr Lacy did not sign and return this contract, he later joined the pension scheme and applied for private medical insurance.
Mr Lacy resigned in 2012 to join a competitor and the company sought an injunction to enforce the restrictions contained in the 2009 Contract. Mr Lacy argued that he was not bound by the covenants because he had not expressly accepted the 2009 Contract. The company contended that his acceptance could be inferred from the acts of joining the pension scheme and applying for private medical insurance. The High Court agreed that acceptance of the new contract could be implied by the fact that Mr Lacy had applied for private medical insurance cover. Joining the pension scheme was not relevant because Mr Lacy had been required to do so after his final salary scheme closed down.
It seems that if Mr Lacy had not applied for the medical cover, he might not have been bound by the restrictions contained in the 2009 Contract. This case is, therefore, a reminder to ensure that employees are required to sign and return new contracts which contain new or varied restrictive covenants. From an employee’s perspective, since agreement to any contractual changes may be implied by conduct, they will also need to make it very clear if they do not accept new contractual terms.