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Are the restrictive covenants in your employment contracts enforceable?

If you are an employer planning on imposing new restrictive covenants upon your employees in the New Year then you should take note of the recent high court decision in Re-use Collections Limited v. Sendall & May Glass Recycling Ltd. The court highlighted the risk that employers face when amending contracts of employment to include or increase restrictive covenants where there has been no specific consideration.

Mr Sendall was initially employed by Re-Use, a glass recycling business with no written terms or conditions or post-termination restrictions. During his employment the company requested him to sign an employment contract containing post-termination restrictions, which sought to protect the company from non-solicitation and competition. Mr Sendall received no consideration from the company for signing the new agreement.

When Mr Sendall left the company to work for a competitor the company sought to enforce the post-termination restrictions. The court held that the restrictions were not legally binding because Mr Sendall had not received “some real monetary or other benefit” (consideration) in return for him signing up to the new restrictions.

The company’s argument that the said restrictions were introduced as part of a package under which benefits were conferred upon Mr Sendall failed on the basis that Mr Sendall already benefited from the majority of the benefits prior to entering into the new contract.

Unsurprisingly his continued employment was not considered as a benefit because there had never been any suggestion he would have been dismissed had he refused to sign up to the new contract.

Conclusion

The moral of the story is if you are considering updating your employment contracts to include post-termination restrictions ensure that there is clear evidence of consideration, otherwise you may find that they are unenforceable.

As always if I can provide you with any further assistance on queries relating to post-termination restrictions or any other issue, please do not hesitate to contact me for a free consultation on 0113 350 4030 or samira.cakali@scesolicitors.co.uk.


Please note that the information in this blog is to provide information of general interest in a summary manner and should not be construed as individual legal advice. Readers should consult with SCE Solicitors or other professional counsel before acting on the information contained here. 

Samira Cakali

Samira Cakali is a pragmatic and approachable solicitor advocate with extensive contentious and non-contentious experience in the fields of employment law as well as civil litigation, within a range of commercial businesses from SME’s to multinationals as well as senior executives.

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