We continue to provide our legal services through the COVID-19 lockdown. Please visit our COVID-19 Hub for legal insights, or contact us directly.
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

Matthew Clayton MA LLM (Cantab), CIPP/E
View profile
Mathew Clayton
Related services
Share this article
Resources to help

Related articles

Coronavirus Job Retention Scheme update: Arrangements for phasing out

Employment & business immigration

On Friday 29 May 2020 the government announced more details about the extension to the Coronavirus Job Retention Scheme. Our employment lawyers summarise the latest below: Last date for furloughing…

Matthew Clayton MA LLM (Cantab), CIPP/E

Furloughed workers and annual leave

Employment & business immigration

The government has provided some long awaited guidance on the treatment of annual leave for furloughed employees affected by the coronavirus pandemic. One of our senior employment lawyers, Jenny Hawrot,…

Jenny Hawrot LLB (Hons)
Associate, solicitor

Business immigration and COVID-19: FAQ for employers

Employment & business immigration

For employers, keeping pace with employment law guidelines in the light of the coronavirus (COVID-19) crisis is no easy task, and businesses who sponsor workers from overseas face another layer…

Helen Howes LLM
Trainee solicitor
Contact us