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03 March 2013

Court will look at whole situation when considering enforceability of restrictions on ex-employee

Employers should consider whether other factors are consistent with any 'legitimate business interests' they claim to be protecting through non-compete clauses and other restrictions on a particular employee. Otherwise, they risk the non-compete clause being found unenforceable, the High Court has ruled.

Two senior employees were not subject to any restrictions against poaching staff or being involved with competitors if they left. However, 17 junior employees were subject to such restrictions for six months after they left. The junior employees also had to give just one week's notice if they left.

The senior and junior employees all left and joined a competitor. Their employer suspected the managers had persuaded the junior staff to go with them, and applied for injunctions against them all. It argued that the restrictions were enforceable as they were necessary to protect the company's legitimate business interest of maintaining a stable workforce.

Previously, courts had considered the restrictions on each individual employee in isolation as to whether they protected a legitimate business interest. However, the High Court also took into account the surrounding circumstances in this case. It ruled that the fact that junior employees could leave with just one week's notice was inconsistent with the argument that a stable workforce was important to the employer. If the restrictions were necessary to achieve this, the Court queried why the senior managers were not also subject to them.

Overall, the employer had failed to show the restrictions were intended to protect a legitimate interest of maintaining a stable workforce. The restrictions were therefore unenforceable.

Employment law partner and practice group leader, Jo Davis says: "Employers should ensure they look at the restrictions imposed on all their employees, the notice period required of each type of employee, and all other relevant factors, to ensure they are consistent with the legitimate interests they claim the restrictions are to protect."

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