By Emma - Monday, August 11th, 2008
Kynixa Ltd v Hynes and others is a recent High Court case which considered amongst other things the enforceability of restrictive covenants contained in a shareholder agreement.
We always advise that it is important to be very precise when drafting restrictive covenants to make sure that they are reasonable enough to be enforceable. In particular the length of time a restriction lasts and how widely it is drawn should be considered.
In this case the High Court held (with a detailed analysis of the case law) that a widely drawn covenant in restraint of trade binding employees who were shareholders for 12 months was reasonable and enforceable both in terms of its length and remit.
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By Liam - Friday, December 14th, 2007
We are frequently asked to advise employees as to the enforceability of restrictive covenants that purport to prohibit an employee from working for a competitor after they leave their current job.
Restrictive covenants can be enforceable, but in order to be enforceable the employer seeking to rely on the covenant must have a legitimate business interest to protect and the covenant must go no further than is reasonably necessary to protect that legitimate business interest.
The Court of Appeal in Beckett Investment Management Group v Ltd v Hall has recently considered restrictive covenants and upheld the enforceability of a non dealing clause. This is a type of restrictions that don’t just prohibit an employee from soliciting clients from their current employer after that employment has ended, but goes further and prohibits the employee from working for such clients or selling to them at all - even if the client or customer contacts the employee without any solicitation from the employee. However, while non-dealing clauses can be enforceable, it is important to ensure they go no further than is reasonably necessary to protect a legitimate business interest - in Beckett, part of the covenant was severed (removed) by the Court on the grounds that it was too restrictive. However, the balance of the covenant could still have effect without the severed part and therefore the rest of the covenant remained enforceable.
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