A large proportion of the ad hoc telephone queries that our employment law team take from potential new clients are about the enforceability of post termination restrictive covenants. Can a non-solicitation clause be held to be enforceable despite not being limited to clients that the employee had been in contact with? Provided that the clause in question does not seem unreasonable, it is difficult for us to clearly answer whether such a clause will be enforceable or not, as it depends on a number of factors. Indeed, a recent English case in the Mercantile Court has highlighted some of the difficulties of advising on enforceability of such clauses. The case (Safetynet Security Ltd. v. Coppage & Another) concerns the enforceability of a ‘non solicitation of customers’ clause, which was intended to prevent an employee from poaching customers of his former employer for a period six months. Such a restrictive covenant will be unenforceable as a restraint of trade and contrary to public policy, unless the employer can show:
- that it has a legitimate proprietary interest that it is appropriate to protect and;
- that the protection sought is no more than is reasonable having regard to the interest of the parties and the public interest.
When drafting non solicitation clauses we usually limit the application of that clause to customers that the employee in question has been in contact with, and for a set period - which is normally the 12 months prior to the termination of their employment. However in this case no such limitation was included in the clause. The employee in question, Mr Coppage, was the business development director of Safetynet; a relatively small business providing security services. Many of its customers saw him as the “face” of Safetynet.
Safetynet began a redundancy consultation period in 2012 and it was in April, during this process that Mr. Coppage resigned, rather than see out the redundancy process. Subsequently a new company was incorporated by a third party and shortly afterwards five of Safetynet’s clients moved their work to the new company. Safetynet believed that Mr Coppage was actually the controlling mind of the new company and that he had acted in breach of his restrictive covenants. The Mercantile Court was asked to consider, amongst other issues, whether the restrictive covenant was enforceable and reasonable - particularly as it was not limited to clients that he had had contact. They held that the restrictive covenant was enforceable and awarded £50,000 of damages to Safetynet.
In their judgment the Court found that limiting the restrictive covenant to the customers with whom Mr Coppage had dealings with over the past 12 months of his employment would not have provided Safetynet with the necessary protection. This was based on the fact that Mr Coppage was a key figure in their operation and was essentially marketed as the face of the business.
The Court emphasised that when considering the enforceability of the restrictive covenant they should have regard to the factual context at the date at which the contract was made. The judgment is a useful reminder that the enforceability of a restrictive covenant depends not only on the drafting of the clause but also on the factual context. In this case the employee’s seniority, his integral role, and the relatively small size of the employer were key factors.
Finally, the case is also a useful reminder for any employers that may be involved in a contentious process that the manner in which they give the evidence will influence the Court’s decision. In their judgment the Court praised Safetynet’s chief executive officer for giving his evidence in an open and straightforward manner. In comparison Mr Coppage was noted to be unhelpful and closed. He was criticised for deliberately misleading the Court, repeating unsubstantiated and irrelevant allegations against Safetynet, deleting incriminating text messages and lying on his Facebook page. The case serves as a useful reminder to employers and individuals that the enforceability of a restrictive covenant is always going to depend on the factual context in which it is being applied. That being said, the secret in drafting clauses that are more likely to be enforced is to get a perfect balance between making the scope of the clause as narrow as possible whilst still giving the employer the protection that they require.
