Post Termination Restrictions.

Another issue which I have commented on previously relates to the ongoing battle between former employers and employees in respect of contractual post termination restrictive covenants.  These covenants are included by all cautious employers in the contracts of employment of their medium and senior level employees and seek to prevent those employees from damaging the business after their departure.

Over the years the decisions of the court ebb and flow between employer and employee, but a recent decision of the Court of Appeal has once again provided comfort to employers.  In Coppage & Another v Safety Net Security Limited, the dispute related to a restriction imposed by a company on a director employee from approaching anyone who had been a customer of the employer during the employee’s employment for a period of six months following his departure. The employee argued that the restriction was excessive and unenforceable in that it should not have extended to customers he had not dealt with and nor did it limit the nature of his contact with those customers.  These arguments were in the context of an obligation on the employer to show that the restrictions in the contract were no wider than were reasonable to protect the employer’s legitimate business interests and represented a fair balance between the interests of the parties and the public.  The employee was initially ordered to pay substantial damages for breach of the covenant and his appeal has now been dismissed by the Court of Appeal.

Once again this decision highlights how important it is for employers to have in place these covenants.  It is also interesting in that in many potential disputes between employer and employee, there is an element of bluff and counter-bluff.  The employer hopes that the covenant is sufficiently well drawn to make the employee fear that if enforcement action is taken it will be enforced and is therefore dissuaded from breaking the restriction.  An employee who seeks to break a covenant will gamble that there is sufficient doubt as to its enforceability that the employer will not wish to risk the time and significant expense of attempting to enforce.  Court decisions of this kind will inevitably affect the views of both parties when considering whether it is worth taking or risking enforcement proceedings and therefore once again the balance swings slightly back to the employer.