When considering a post employment restrictive covenant on an employee, the court should allow that an employer has a legitimate interest in maintaining a stable and trained workforce. However, even accepting that interest, an employer has no legitimate interest to prevent an employee, upon termination from taking employment with a competitor.
Jenkins LJ said: ‘Apart from the question of trade secrets and confidential information, we have described the matter requiring protection as being the adequacy and stability of the plaintiffs’ and defendants’ respective complements of employees. That, no doubt, is an interest which employers are entitled to protect by all legitimate means, as by paying good wages and making their employment attractive. We have further described the danger against which that interest required protection as being the unimpeded secession of employees of either of the parties to that of the other of them under the inducement of higher wages or better working conditions. But an employer has no legitimate interest in preventing an employee, after leaving his service, from entering the service of a competitor merely on the ground that the new employer is a competitor. The danger of the adequacy and stability of his complement of employees being impaired through employees leaving his service and entering that of a rival is not a danger against which he is entitled to protect himself by exacting from his employees covenants that they will not, after leaving his service, enter the service of any competing concern. If in the present case the plaintiffs had taken a covenant from each of their employees that he would not enter the service of the defendants at any time during the five years next following the termination of his service with the plaintiffs, and the defendants had taken from their employees covenants restraining them in similar terms from entering the employment of the plaintiffs, we should have thought that (save possibly in very exceptional cases involving trade secrets, confidential information and the like) all such covenants would on the face of them be bad as involving a restraint of trade which was unreasonable as between the parties. Here the plaintiffs and the defendants have, as it seems to us, sought to do indirectly that which they could not do directly, by reciprocal undertakings between themselves not to employ each other’s former employees, entered into over the heads of their respective employees, and without their knowledge. It seems to us to be open to question whether an agreement such as that, directed to preventing employees of the parties from doing that which they could not by individual covenants with their respective employers validly bind themselves not to do, should be accorded any greater validity than individual covenants by the employees themselves would possess.’
Judges:
Jenkins LJ
Citations:
[1959] Ch 109
Jurisdiction:
England and Wales
Cited by:
Cited – Office Angels Ltd v Rainer-Thomas CA 1991
Reasonability Test of Post Employment Restriction
The court re-stated the principles applicable in testing whether an employee’s restrictive covenant was reasonable: ‘The court cannot say that a covenant in one form affords no more than adequate protection to a covenantee’s relevant legitimate . .
Cited – Associated Foreign Exchange Ltd v International Foreign Exchange (UK) Ltd and Another ChD 26-May-2010
The claimant sought interim injunctions to enforce a restrictive covenant against solicitation of customers in a former employee’s contract. The employee, a FOREX dealer, had been placed on garden leave for three months and then his contract . .
Lists of cited by and citing cases may be incomplete.
Employment
Updated: 18 June 2022; Ref: scu.416383
