In Bartholomews Agri Food v Thornton, the High Court resoundingly rejected the reasonableness of a restrictive covenant in an employment contract on various grounds.
With thanks to Daniel Barnett and Miranda de Savorgnani of Outer Temple Chambers for preparing this very interesting case summary about a recent High Court ruling on the efficacy of a restrictive covenant.
First, the Court ruled, in accordance with Pat Systems v Neilly [2012] IRLR 979, that a covenant which was unenforceable when it was first imposed, remains unenforceable regardless of whether the employee is later promoted to a role where it could be regarded as reasonable. In this case, the covenant was in place when the employee first entered the business as a trainee agronomist in 1997. At that time he had no experience or customer base; therefore a non-compete clause which prevented him from working with any of the employer's existing customer base for six-months was manifestly inappropriate and in restraint of trade. On that basis alone, the covenant was unenforceable.
In any event, the Court went further and found that the terms of the covenant were drafted too widely to be unreasonable even after the employee's 20-year career. It sought to prevent the employee from dealing with any customer of the employer regardless of whether he had had any prior dealings with the customer. Given that the employee worked with customers who represented only 2% of the company's overall turnover, it would be manifestly unfair to prevent him from working with customers representing the other 98% of the employer's existing customer base.
Nor was the Court persuaded by an unusual term of the clause which provided that the employer would continue to pay the employee in full during the six-month period. Following JA Mont (UK) Ltd v Mills [1993] IRLR 1782 in the context of a severance agreement, it would be contrary to public policy to allow an employer to 'purchase' a restraint of trade.
