Non-compete in employment contract held to be unreasonable and void

The coronavirus pandemic has led to many individuals losing their jobs due to redundancies and employees may wonder where they stand in relation to any restrictive covenants in their contracts. The case of Quilter Private Client Advisers v Falconer discusses the factors to be taken into account when seeking to enforce a restrictive covenant, which in this case was a 9 month non compete, which was found to be void and unenforceable.

Senior financial adviser’s alleged breach of non-compete

Ms Falconer (“the Employee”) was employed as a financial adviser of Quilter Private Client Advisers (“the Employer”) and the Claimant in the proceedings, in January 2019 and resigned during her probationary period. She went on to work for one of the Employer’s competitors, which her employer alleged was in breach of a nine month non-compete clause in her employment contract.

The Employer took steps to enforce the covenant after a couple of months when it discovered the Employee was working for a competitor and brought a claim in the High Court against the Employee to enforce the non-compete, non solicitation and non-dealing covenants in her contract as well as misuse of confidential information.

Employer’s non-compete held to be unenforceable

The Court held that the non-compete clause was unenforceable in recognising that the Employer had legitimate interests to protect in the shape of confidential and customer connections, the restriction went further than was reasonably necessary to protect those interests.

The Court considered the following factors in concluding that the non-compete was unreasonable and unenforceable:

• The Employee as still in her probationary period and the nine-month restriction applied irrespective of the length of employment. It was unreasonable to prevent the Employee from being employed by a competitor for nine months when she had only worked for the Employer for a couple of weeks;
• The Employee had a short notice period of two months’ notice (two weeks in her probationary period), which implied her services were less valuable to the employer and in less need of strong or excessive protection;
• Junior employees in the company had the same restraints as the Employee and therefore it was clear to the Court that the Employer had sought to implement a “one size fits all” approach on the restrictions and they had not been tailored to the Employee’s specific role; and
• The Court found that a non-dealing covenant would have been more adequate than a non-compete restriction and evidence suggested that non-competes were more unusual in the field of financial advisers and not industry standard and therefore unreasonable.

As a senior financial adviser with access to a range of clients and company information, it is not uncommon for an employment contract to have restrictive covenants in order to protect the interests of a company including its employees and clients which make up its business. A Court will however look at the duration and the reasonableness of the restrictive covenant and carry out a balancing exercise of the employer’s rights versus the employee’s.

Our employee has breached their employment contract

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