Can We Stop Them

Restrictive covenants (clauses which are normally found in contracts of employment and partnership agreements, which restrict the right of a person to compete with his or her firm) have always been a difficult area of law.

The courts are able to strike out any clauses within these agreements which they think are unfair and, in some cases, can even remove the restriction altogether. When this is done, normally the rest of the agreement is left untouched, so only the unenforceable provision is removed.

The courts have recently been taking a slightly different approach in some cases amending the wording of covenants to reflect what they believe the original intention was, rather than striking the clause out altogether.

One case involved a man called Rawlings, who was a director of an investment company. When he left his employers, they sought an injunction to prevent him from soliciting business from former customers or prospective customers of the firm.

The way the clause was drafted was wide and used the words 'any person, firm or company' and could be construed to mean any person or company with which the employer had or intended to have dealings, not just their investment business clients and prospects.

The court agreed with Rawlings that this was too wide, but instead of striking out the clause altogether, they amended it to reflect the original intention.

Employers seeking to incorporate restrictive covenants are well advised to ensure that the clauses are correctly drafted, as it is still possible that they could be struck out altogether. On the other hand, employees who keep silent during negotiations where there is a widely drafted restrictive covenant, relying on the assumption that the court will simply strike out the over-wide clause, could be in error. The clause may be amended instead.

 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.