Enforceability of restrictive covenants

In the current economic climate, most employers are especially eager to ensure that their employees are under effective restraints of trade following termination of their employment. Such restraints are, however, only effective to the extent that the employer can show that they go no further than required to protect a legitimate business interest and that the protection sought is no more than is reasonable.

This issue was considered in the recent case of Romero Insurance Brokers Limited v Templeton and Eastwood & Partners Limited [2013]. In that case a senior insurance broker had a 12 month non-solicitation covenant and the Court had to decide if that was reasonable and therefore enforceable.

The contract provided that Mr Templeton was not permitted for a period of 12 months to procure orders from or do business with the Company’s clients with whom he had dealt within the last 6 months of his employment. The High Court decided that the restriction was enforceable because it was satisfied that insurance renewals usually take place every 12 months and on that basis contact with clients was annual and therefore 12 months was reasonable..

While this case does not establish any new principles, it reminds practitioners, employers and employees alike that the courts will examine any trade restriction in the specific business context and that careful consideration has to be given to individual circumstances.

If you would like any further information about restrictive covenants, or any employment law rleated issue, please contact me by emailing linky.trott@edwincoe.com.

If you aren’t receiving our legal updates directly to your mailbox, please sign up now