Back

Please note our offices and reception will be closed from 1pm on Tuesday 23 December. We will re-open 29-31 December from 10am-4:30pm, before re-opening as usual on Friday 2 January.

Get in Touch Menu

Enforcing restrictive covenants

20 November 2012

A recent case illustrates the difficulties employers can face when trying to enforce restrictive covenants in employment contracts.

In CEF Holdings Ltd v Mundey and others, the court refused to restrict a group of individuals from competing with their former employer.

A term restricting a former employee’s activities is void for being a restriction on trade unless the employer can show that such a term is reasonable and necessary to protect an interest.

In this case, a number of CEF’s employees, including two managers, joined Yesss Electrical, a business set up to compete with CEF. The managers had no restrictive covenants in their contracts. However, their former employer argued that they were in breach of their duties owed to CEF and also that they had sought to entice former colleagues to join Yesss. All the remaining defendants had express restrictions in their contracts. CEF also applied for a ‘springboard injunction’, a mechanism to prevent the managers gaining an unfair early advantage by using contacts they had made while with CEF.

The court found that the express employee restrictions were invalid because they were unreasonably wide. They also took account of the absence of comparable restrictions for the managers and the fact that the employees only had to give a week’s notice – both of which undermined CEF’s argument that they had a legitimate and vital interest to protect. The application for a springboard injunction was also rejected because of the absence of post-termination restrictions in the managers’ contracts and the fact that they did not owe any fiduciary duty to CEF.

Restrictive covenants are a grey area of the law: just because they are written down does not mean they are automatically enforceable. Clearly when deciding if restrictions are reasonable, the courts now take account of comparable covenants and length of notice periods in fellow employees’ contracts, so this is an area where employers must tread carefully.

As always, if you need commercial and pragmatic legal advice, we’re here to help so please get in touch.

Contact us

Disclaimer: All legal information is correct at the time of publication but please be aware that laws may change over time. This article contains general legal information but should not be relied upon as legal advice. Please seek professional legal advice about your specific situation - contact us; we’d be delighted to help.
Contact
Matthew Clayton MA LLM (Cantab), CIPP/E
Partner
Mathew Clayton
View profile
Related services
Share this article
Resources to help

Related articles

Five 2026 legal updates for businesses

Employment & business immigration

With the new year upon us, businesses, owners and landlords are set to face a wave of legal changes that will affect how they employ people, structure assets, manage property…

Willans
Solicitors

Wrongful dismissal: What lessons can be learnt from this case?

Employment & business immigration

Wrongful dimissal is a common claim in the UK, so what lessons can be learnt from this case? Our employment law experts take a look. Wrongful dismissal is a contractual…

Simon Pathé FCILEx
Partner, chartered legal executive

Increase to Immigration Skills Charge confirmed

Employment & business immigration

An increase to the Immigration Skills Charge has been confirmed. Our business immigration experts look into what has changed and how the changes will impact your business. The Home Office’s…

Klára Grmelová MGR (LLM Czech)
Solicitor
Contact us