Restrictive covenants in employment contracts

In order to be enforceable, restrictive covenants in employment contracts must protect a legitimate business interest of the employer and be reasonable in scope.

In the recent case of Patsystems Holding Ltd v Neilly [2012] EWHC 2609 (QB), the High Court confirmed that reasonableness should be judged on whether the covenant was reasonable at the time it was made, not at the time the employer seeks to enforce it.  So if an employee enters a restrictive covenant that, at the time, is unreasonable but later becomes reasonable (after a promotion, for example), the convenant remains unenforceable.

It is therefore advisable for employers to review all restrictive covenants given by their employees to ensure that the covenants are appropriate and reasonable.   Employers should also consider seeking fresh acceptance of covenants where employees’ circumstances have changed.

Should you have any employment related enquiries please contact James Macdonald or Michael Latner in our employment team by calling 020 8891 6141 or e-mail j.macdonald@srb.co.uk orm.latner@srb.co.uk