Clauses that prevent ex-employees from setting up in competition and stealing customers are tricky to get right. If they are too vague or broad, they could be considered by the courts to be unenforceable.
In Croesus Financial Services v Bradshaw, the High Court was asked to consider the reasonableness of a restrictive covenant that stopped the ex-employee from soliciting or having dealings with the employer’s customers for 12 months following the termination of employment. The employee argued that this was too broad as it covered any customers he’d had any personal contact with in the course of his duties during the previous two years. However, the High Court dismissed his claim, stating that the clause related to contacts that were more than trivial. It found that Croesus was only doing what was reasonable to protect its business.
Period of time in which contractual restrictive covenants remain enforceable
The Court also stated that the 12 month period was the norm for the industry. It’s interesting to note that the Court considered the nature of the relationship that existed between financial advisers and their clients and decided that 12 months was not an unreasonable period of time to allow Croesus to build relationships between the employee’s previous clients and other advisors within the company.
How we can help
For further guidance on developing contractual restrictive covenants that safeguard your organisation, contact us today on 0330 223 5253 or office@fitzgeraldhr.co.uk.
