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.
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.
The new Labour government has scrapped the Conservative bill that gives workers the right to request a predictable working pattern, in favour of stronger, more certain working hours. As well…
Changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) are now in effect for transfers taking place on or after 1 July 2024. The new rules relating…
The new ‘Tipping Act’ will come into force on 1 October 2024. The new Employment (Allocation of Tips) Act 2023 – also known as the Tipping Act – is to…
By clicking Accept you are agreeing to the use of all cookies which will allow us to provide you with the most relevant experience when visiting or re-visiting this website. This means that your personal preferences will be remembered when you use this website. You can change your consent or choose specific settings by clicking "Cookie Settings". By clicking "Reject All" we will not use any non-essential cookies. Essential cookies will still be used for the website to function properly. Please see our cookie policy and privacy notice for more information about how we process your personal data.
Our website uses cookies to improve your experience while you navigate through our website. Out of these cookies, the cookies that are categorised as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyse and understand how you use our website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies but it may affect your browsing experience on our website. You can find our cookie policy here.
Necessary cookies are absolutely essential for our website to function and enable core functionality such as security and accessibility. These cookies do not store any personal information. You can block these cookies by changing your browser settings, but this may affect how the website functions.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Cookie
Duration
Description
__cf_bm
30 minutes
This cookie, set by Cloudflare, is used to support Cloudflare Bot Management.
mgref
1 year
This cookie is set by Eventbrite to deliver content tailored to the end user's interests and improve content creation. It is also used for event-booking purposes.
yt-player-headers-readable
never
The yt-player-headers-readable cookie is used by YouTube to store user preferences related to video playback and interface, enhancing the user's viewing experience.
yt-remote-cast-installed
session
The yt-remote-cast-installed cookie is used to store the user's video player preferences using embedded YouTube video.
yt-remote-connected-devices
never
YouTube sets this cookie to store the user's video preferences using embedded YouTube videos.
yt-remote-device-id
never
YouTube sets this cookie to store the user's video preferences using embedded YouTube videos.
yt-remote-fast-check-period
session
The yt-remote-fast-check-period cookie is used by YouTube to store the user's video player preferences for embedded YouTube videos.
yt-remote-session-app
session
The yt-remote-session-app cookie is used by YouTube to store user preferences and information about the interface of the embedded YouTube video player.
yt-remote-session-name
session
The yt-remote-session-name cookie is used by YouTube to store the user's video player preferences using embedded YouTube video.
ytidb::LAST_RESULT_ENTRY_KEY
never
The cookie ytidb::LAST_RESULT_ENTRY_KEY is used by YouTube to store the last search result entry that was clicked by the user. This information is used to improve the user experience by providing more relevant search results in the future.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Cookie
Duration
Description
_ga
2 years
The _ga cookie, installed by Google Analytics, calculates visitor, session and campaign data and also keeps track of site usage for the site's analytics report. The cookie stores information anonymously and assigns a randomly generated number to recognize unique visitors.
_gat
1 minute
This cookie is installed by Google Universal Analytics to restrain request rate and thus limit the collection of data on high traffic sites.
_gid
1 day
Installed by Google Analytics, _gid cookie stores information on how visitors use a website, while also creating an analytics report of the website's performance. Some of the data that are collected include the number of visitors, their source, and the pages they visit anonymously.
_s
1 year
This cookie is associated with Shopify's analytics suite.
G
1 year
Cookie used to facilitate the translation into the preferred language of the visitor.
vuid
2 years
Vimeo installs this cookie to collect tracking information by setting a unique ID to embed videos to the website.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Cookie
Duration
Description
VISITOR_INFO1_LIVE
6 months
YouTube sets this cookie to measure bandwidth, determining whether the user gets the new or old player interface.
VISITOR_PRIVACY_METADATA
6 months
YouTube sets this cookie to store the user's cookie consent state for the current domain.
YSC
session
Youtube sets this cookie to track the views of embedded videos on Youtube pages.