The house considered a clause imposing a post employment restrictive covenant which was to operate for twelve months ‘following the termination of [the employee’s] employment hereunder (howsoever caused).’
Held: Lord Caplan said: ‘With regard to the argument that the reference to termination of employment ‘howsoever caused’ is too wide, because it would countenance a situation where the employer could unlawfully dismiss his employee and then avail himself of the covenant, I find difficulty in following this. I find no difficulty with the views expressed by Lord Coulsfield and Lord Abernethy to the effect that a provision which provided for the operation of a covenant on a termination of employment however caused, be it lawfully or unlawfully on the part of the employer would be objectionable. However, the question remains whether the particular provision being considered is as wide as this and I need not concern myself with the construction that it was approriate to place on the provisions in the Living Design case and the Lux case. In my view the relevant provision ‘howsoever caused’ in the present case is not apt to cover unlawful termination. There are many ways in which an employment contract can be lawfully terminated. The contract may be terminated upon proper notice, the term of a contract may expire, the parties may agree that it should be terminated precipitately, or the employer may dismiss the employee if he has a legitimate reason for doing so. In all of these situations the employer will have a valid interest in applying the restrictive covenant to protect his business connection. On the other hand, there would be no effective purpose in providing against a termination caused by the employer’s unlawful conduct. If the employer were to dismiss his employee unlawfully then by the operation of the principle of mutuality of contractual provisions the restrictive covenant would not be available to him. In the situation considered by Lord Coulsfield in the Living Design case the contract (for some reason) specifically provided that the covenant should cover an unlawful termination. However, in the absence of such a specific provision I do not think that it can be readily inferred that the parties intended that the contract be read so as to incorporate such a provision.’
Judges:
Lord Caplan
Citations:
[1996] IRLR 188
Jurisdiction:
Scotland
Cited by:
Cited – Rock Refrigeration Limited v Jones and Seward Refrigeration Limited CA 10-Oct-1996
The claimant sought to enforce a post employment restrictive covenant given by the defendant. The defendant replied that the clause was too widely framed and was unreasonable since it applied to a temination of his contract ‘howsoever occasioned’. . .
Lists of cited by and citing cases may be incomplete.
Employment
Updated: 01 May 2022; Ref: scu.276821
