A Case on Restrictive Covenants

25th March 2013
A Case on Restrictive Covenants image

A Case on Restrictive Covenants

Employment Contracts often contain what are known as restrictive covenants.  Businesses seek to impose such restrictive covenants in order to try and prevent or limit a departing employee from doing such things as setting up in competition, working for a competitor, enticing away staff and soliciting customers and suppliers.

The restrictive covenant must be reasonable, in that it can only go so far as reasonably protecting a legitimate interest of the business and should not be used to stop departing members of staff from working.  As a result it is always important to get legal advice on such clauses, to try and ensure that they are reasonable or otherwise if they are found to be unreasonable then they will be void and have no effect whatsoever. 

An interesting case on restrictive covenants from the end of last year (2012) was Pat Systems –v- Neilly, which was determined by the High Court. 

Mr Neilly joined Pat Systems in 2000 as a junior salesman.  His original contract included a restrictive covenant stating that for twelve months after leaving the company he could not join a competitor.  In 2005 Mr Neilly was promoted to director of global accounts, a senior position.  Upon promotion he signed a letter that increased his salary and notice period.  The letter also included an acknowledgement that all other terms and conditions in his contract would remain unaltered.

In 2012 Mr Neilly resigned giving three months’ notice, and informed Pat Systems that he intended joining a company that Pat Systems regarded as a competitor. 

In response Pat Systems dismissed him without notice for a serious anticipatory breach of contract. 

The High Court considered that at the time Mr Neilly entered the contract in 2000 that it was quite clearly the case that the clause was void as it was unreasonable to impose a 12 month restriction on a junior salesman. 

However Pat Systems argued that the contract had been entered into in 2005 when Mr Neilly got promoted, upon the basis of his acknowledgement that all other terms remained unchanged. 

The High Court ruled that an acknowledgement was insufficient, and that Mr Neilly either needed to sign a new contract (including the covenant) or he needed to sign a fresh indication of acceptance of the existing covenant.

Daven Naghen, head of our Employment Team commented as follows:-

“This highlights the need for businesses to ensure that employees sign a new contract every time there is a change in role or a promotion.  Had Pat Systems done so in 2005 when Mr Neilly was promoted, then this probably would have prevented Mr Neilly from joining a competitor for 12 months as a 12 month restriction would probably have been deemed reasonable for the position he had acquired in 2005.”

If you need advice on restrictive covenants or any issues in respect of drafting contracts then please contact Daven Naghen on 01775 722261 or email daven.naghen@maplessolicitors.com or write to Dav at 23 New Road, Spalding, Lincolnshire PE11 1DH.

Dementia Friends image

Dementia Friends

Maples Solicitors are proud to announce that they have now joined to become Dementia Friends which is an Alzheimer’s Society initiative.

The private client department of Maples Solicitors prepare Wills and Lasting Powers of Attorney on a regular basis and this often involves dealing with clients who are suffering from dementia. The private client team pride themselves on spending as much time as is necessary to assist all of their clients, but those suffering from dementia often require additional assistance and time to ensure that they have fully understood the legal documentation that they are creating. The private client department are regularly complimented on the way they deal with such clients, whether this be explaining things to them in a clear and uncomplicated manner, spending time with them or putting them at ease.

It is a misconception that anyone suffering from dementia cannot make a Will or Lasting Power of Attorney. Only if someone lacks sufficient mental capacity are they unable to make such a document. It is therefore vitally important upon any diagnosis of dementia that legal advice is taken as soon as possible to make sure that your affairs are in order so that it is easier for your family to deal with your affairs if you are unable to do so yourself.

To become Dementia Friends, Maples Solicitors have pledged to develop their understanding of dementia and continue assisting clients suffering from dementia with their legal affairs in a respectful, friendly and efficient way that is not daunting making the process as easy as possible.

Read More


Gemma Mayer LLB

"I would highly recommend Maples Solicitors, especially Gemma Mayer, for any conveyancing work. The level of support and professionalism was excellent at all times. I also felt if I needed to ask or clarify anything that it was not an issue. Buying and selling a house is stressful enough, but Gemma helped me through it step by step."

Anita Toal LLB BA

"I think you are brilliant. You can use my comments above. You are efficient, friendly and quite clearly very good at what you do. Mainly you don’t leave people hanging around too long for." "So easy to talk to her and she understood what I wanted. She put me at ease and I cant thank her enough"

James Turner BA

James Turner was extremely helpful with our buying process. Everything went smoothly. We are very happy with the level of professionalism demonstrated by the office. Highly recommended solicitors. Will definitely do business with them again.

Daven Naghen LLB

"Daven provided an excellent service, from attending the first interview with me to the final court appearance. He filled me full of confidence that he would defend me to which he did and come out with an excellent outcome in view of my position that I had put myself in."

Faye Blair LLB

Faye was excellent, sensitive and acted very well to the time constraints we faced. Great service and dealt with compassion at such sad times made the process less painful very professional.

Jamie Dobbs GCILEx

Over the last forty years I have cause to deal with many law firms both in a personal and professional capacity, including some ‘top’ London Companies. In all of those dealings I have never found anyone as proactive and so willing to offer help and advice as Jamie Dobbs. During the last two years Jamie guided my parents through the completion of Lasting Powers of Attorney. Helped myself with the use of the LPA and recently dealing with Probate and Estate Administration following their death.

Mike Pepper MA

Mike Pepper gave us excellent advice. He was always most helpful and accommodating giving lucid explanations every step of the way. Thank you Mike.

Donna Sandison FCILEx

Donna has been helpful and professional every step of the way during the process. Always on hand to answer any queries and totally professional and friendly at all times.