The Jeremy Clarkson, Top Gear affair is providing useful inspiration for our bi-monthly employment law article. First there was the opportunity to analyse the legal implications of his suspension and subsequent dismissal and there are now reports suggesting that clauses in the presenter’s contract with the BBC prevented him, and his co-presenters, James May and Richard Hammond, from moving to ITV. This, in turn, raises the question: how can an employer stop its star employee from joining a competitor?
In an attempt to protect its business interests, many employers will incorporate ‘restrictive covenants’ into their employees’ contracts. These clauses can take many forms but will most commonly seek to prevent an employee, after the employment relationship ends, from soliciting or dealing with customers or, as appears to be in play in Mr Clarkson’s case, from joining a competitor. The key question, however, is whether such clauses are enforceable.
The starting point is that such clauses are void for being in restraint of trade unless the employer can show that the clause is to protect a legitimate business interest (customer connections, for example) and goes no further than is necessary to protect that interest. Non-compete clauses tend to be harder to enforce than non-dealing or non-solicitation clauses, as they may prevent an employee from earning a living for the period of the covenant.
From a practical point of view, there are a number of steps that an employer can take to increase the probability of their restrictive covenants being enforceable:
- The drafting of restrictive covenants should be tailored to the employee’s specific role within the company – blanket covenants that apply to all employees, regardless of position or seniority, are less likely to be enforceable.
- The restrictions should be regularly reviewed. If an employee is promoted, for example, then it may be necessary to amend their restrictive covenants to reflect their increased level of responsibility. Likewise, restrictions may need to be updated if a company expands into different areas of business or into new geographical locations.
- If new or amended restrictions are implemented, either at the beginning or during the employment relationship, it is important to ensure that there is evidence to show that the employee in question agrees to the covenants.
For further information please contact our Employment Team on 0800 088 6004.