The courts have thrown light on how they will deal with cases involving the enforcement of post-employment restraints.
In one recent case, the court ordered that two former executives be restrained from competing with their former employer, even though the restraint period in their contract was due to expire the following month. The decision shows that the potential inconvenience suffered by a former employee is not superior to a former employer’s right to enforce the restraint.
In this case, both executives had signed employment contracts containing a term that restrained them for a certain period from engaging in any business in competition with their former employer.
The judge decided that it was right to force the executives to give up their jobs until the restraint period ended, saying that the short period between the judgment and expiry of the restraint period was a matter which cuts both ways. Although the court’s order would likely cause the executives to suffer a serious interference, the judge said this had to be looked at in light of the fact that both of them had been very senior employees paid significant remuneration under their contracts, and that the restraints that were part of the bargain should be upheld.
In another case, however, the court ordered only partial enforcement of post-termination clauses – the consequence being that a former manager was able to continue to work for a competitor of the former employer, though not look for new business until the restraint period was completed.
In this case, the employee, a national sales and marketing manager, had a contract with a 12-month post-termination restraint clause. After he was made redundant, the manager started working for a company that had once sold its product through his former employer, but no longer did so.
In allowing the employee to continue in his new employment, the judge said that the manager was not the author of his own misfortune, but rather his former employer had created the situation when they terminated him by reason of redundancy. The judge also said that enforcing the non-compete provision would deprive the manager of earning until he found alternate employment, and also prevent him from working in an area of his choice. On the other hand, enforcing the non-solicit provisions would not have such adverse impacts, but would protect the interests of his former employer over customer connections.