Yes held a High Court in the case of Law by Design v Ali

It is very common for contracts of employment or service agreements to contain post-termination restrictive covenants preventing an from engaging in certain activities after their employment has terminated. This is particularly the case for senior employees. 

The general rule of thumb is that restrictive covenants should go no further than is reasonably necessary to protect the employer’s legitimate business interest(s). Therefore, each case is fact specific depending on the circumstances.  

In this case, Ms Ali worked at Law by Design (LBD) and in her service agreement and shareholders agreement there were restrictive covenants which included non-competes. Her service agreement prevented her from working for a competitor on business she was involved in for LBD for 12 months after her employment terminated. 

LBD largely work for NHS clients and Ms Ali, during her time at LBD, primarily worked for NHS clients as an employment lawyer. Ms Ali left LBD to work for Weightmans, another law firm who LBD considered to be a competitor. 

When Ms Ali left LBD they requested that Ms Ali sign undertakings in relation to her ongoing post-employment obligations, but she refused. LBD applied for injunctive relief (in other words they applied for the court to issue an order that would force Ms Ali to comply with her restrictive covenants).

In this case, Ms Ali had produced a business plan for her new employer in which she said that she could “transition” clients to her new employer from LBD generating around £250,000 a year. Ms Ali argued that the non-compete restrictive covenant was unenforceable.

 

High Court’s decision and key takeaways

The High Court granted the injunction. The majority of Ms Ali’s clients at LBD were NHS clients. The Court held that the non-compete covenant which allowed Ms Ali to join a business anywhere in England and Wales that does not compete with LBD for NHS clients did not appear to be wider than is reasonably necessary to protect LBD’s interests.  

Injunctions can be used to enforce restrictive covenants. They are granted at the discretion of the Court based on what it, after looking at the evidence, regards as fair in the circumstances. In this case, the Court held that LBD was entitled to seek to protect the clients built up by LBD employees providing legal services to NHS clients. 

It is important that restrictive covenants are not drafted too widely and that care is taken to ensure that they are reasonable when having regard to the specific employee they restrict.  

If an injunction is granted they tend to be very effective because if a person fails to comply with an injunction they may be held to be in contempt of court and have their assets seized or even be imprisoned. 

 

We can help

If you are:

• an employee who would like advice on your restrictive covenants; or 
• an employer looking for advice on enforcing restrictive covenants, 

please get in touch with us here at People Legal. 

We are trained and experienced in handling all matters of employment law and can provide you with the information you need.

 

Call us on 0800 368 8470 or arrange a chat at www.people.legal/contact for free initial advice.

Please note the information contained in this briefing is intended as a general review of the subject featured and is not a substitute for obtaining specific legal advice.