In general many senior employees know the intimate details of the companies they work for and their departure to a competing business can be a disaster, especially if they have worked at the company for a long time.
However, a recent High Court case has shown that professionally drafted contractual restrictions on what employees can and cannot do after they leave can be highly effective in softening the blow.
The case concerned a woman who had performed an essential role in an international recruitment company where she had been employed for 13 years. She was viewed as a valuable addition to the team when she joined the company and rose through the company to partner and then global head of the practice group. However, after 13 years with the company, she announced her resignation and that she would be taking up a post with an American company, which was known to be carrying on business in the same specialist field.
The woman’s contract contained a restrictive covenant that, amongst other things, forbade her from being directly or indirectly concerned or interested in any competing business for six months after her departure. The relevant clause stated that the defendant should not "within six months from the termination date... engage or be interested in any business carried on in competition with any of the businesses of the (claimant)... carried on at the termination date (or twelve months previously)... and with which you were materially concerned". The claimant company therefore contended that this clause had been breached.
Although willing to comply with other provisions of the covenant, the woman argued that part of it was unenforceable and was unreasonably preventing her from getting on with her career, suggesting that the clause was wider than reasonably required to protect the claimant’s interests.
Her arguments were rejected. The Court noted that she was an experienced businesswoman who had entered into the contract with her eyes open. The covenant was reasonable and valid and there had been no good reason for not enforcing it. Therefore the woman would have to wait until the expiry of the six-month period before taking up her new position.
The company did not object to her performing a restricted training role for her new employer in the interim.
Case Ref: Egon Zehnder Limited v Tillman. Case Number: HC-2017-001053