Case Law Update: imposing new restrictive covenants on employees

Dispute Resolution - 1 minute read

In contract law, unilaterally imposing a restriction in an employment contract would only be enforceable if the employer had given the employee ‘consideration’, that is, a tangible benefit, such as a pay rise, bonus or promotion, in return for the new restriction.

Two trainee agronomists were asked to sign fresh contracts of employment. The new contracts contained restrictions stopping them from soliciting or dealing with their employer’s clients for six months if they ceased to be employed. Both then later resigned and went to work for a competitor. The employer sued for breach of the restrictions. The ex-employees asked the court to declare that the restrictions were invalid on the basis no additional benefit (consideration) had been given.

The judge held that there was good consideration: had the two refused to sign the fresh contracts, they would not have been given access to new confidential information, and would likely have been given notice. 

Lessons? Employers proposing to ask existing employees to agree new post-termination restrictions should consider whether simply keeping them on as employees may be sufficient benefit to ensure that the restrictions are enforceable. If so, it is worth including a statement that the employee is being given access to clients and information as consideration for the contract being signed and that the employee is being retained on this basis.

The Case? Case ref: Pickwell & Nicholls v Pro Cam CP Ltd [2016] EWHC 1304

The Judge held that the covenant was not unreasonably wide. A notice period of six months and a covenant for six months was reasonable