Category: General Rule

Restrictive Covenants

General Rule: Void unless reasonable in respect of subject matter, time and distance.

1st step An employer must have a legitimate business interest to protect

(e.g. trade secrets, goodwill, customer connections)

What is e/er claiming rights over ? ie, a salesman knows and deals with customers face to face and could potentially give details re deals, customer base to new e/er and then undercut former e/er and take business away

Ie, a research + designer for a drugs company working in a medical capacity has lots of secret info not in the public knowledge

2nd Step the restraint must be reasonable

  • must be no wider in protecting the type of work
  • no wider than necessary in time and area. Taxi company Manchester
  • If they are drafted too widely then it may be void.
  • If the Court decides its unreasonable the whole clause could fail

ie – senior management in a coach company, e/er says after leaving that he cant work for any coach or tour operator in a 3 mile radius for 12 months

– is 12 months too long ? how long till the info goes out of date ?  

– if it’s a computer company 12 months is too long as it would be obsolete as technology changes all the time

– is 3 miles too far ?  decide for yourself

– is coach AND tour operator too wide ?  yes, too restrictive, basically stops e/ee working in the coach trade within 3 miles

– you can only stop them working within your FIELD of work

– tour operator is outside the field therefore too restrictive

– if its too restrictive WHOLE clause fails…… unless…….. blue pencil rule

Blue Pencil Rule you can use this rule in some circs to cross out a certain bit of a

clause

Court can sever offending parts of clauses

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