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FL Memo Ltd © 2007 |
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Employment Memo 2007 Newsletter Issue 2 |
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RECENT CASES |
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Company information Restraints and restrictive covenants 1. Interest to protect ¶2572 In a case concerning the interpretation of restrictive covenants, two financial consultants were bound to their employer by contracts which included a term that on leaving employment the consultants should not compete for the business of any client of their employer. At the High Court, it was observed that the consultants provided their services through subsidiary companies within a corporate group of which their employer was the holding company. Since their employer did not in fact provide advice about anything to anybody, the restriction was held to be of no practical utility. Accordingly, the covenants were unenforceable. The Court of Appeal subsequently held that the key question was whether the employer had a legitimate business interest to protect. Given that it did, it was reasonable to interpret the clause as prohibiting the provision of advice to a client of any subsidiary of the employer. Interpreted in this fashion, the covenants were properly enforceable. Beckett Investment Management Group Ltd and ors v Glyn Hall and ors [2007] EWCA Civ 613 2. Non-dealing covenants ¶2595 In a case concerning the reasonableness of various restrictive covenants, the Court of Appeal has held that an important consideration is the nature of the market in which the employee is engaged. The more specialist the market, the more likely it is that a non-dealing covenant will be upheld. Beckett Investment Management Group Ltd and ors v Glyn Hall and ors [2007] EWCA Civ 613 3. Severing ¶2633 In a case before the Court of Appeal, two financial consultants were bound to their employer by contracts which included restrictive covenants. One term held that on leaving employment the consultants should not compete for the business of any client of their employer, nor for the private business of any individual who was an officer, employee or representative of a client. The Court of Appeal held that a restriction which prevented the consultants from canvassing work from individuals who had not been, in their personal dealings, clients of the employer was so wide as to be unreasonable. Applying the “blue pencil” test (¶2633), the Court held that it was possible to sever the offending clause, leaving only the reasonable restriction against competing for the business of actual clients. Beckett Investment Management Group Ltd and ors v Glyn Hall and ors [2007] EWCA Civ 613 Whistleblowing Detriment caused by fellow worker ¶2761 Workers who reveal serious employer misconduct are protected from detriment. A worker may not be dismissed by his employer, nor may they be victimised by his employer or by a fellow employee for making a disclosure. |