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Breaking News: Restrictive Covenants

Wednesday, 30 July 2014, Categories Latest News | VP News | Employment Updates

Breaking News: Restrictive Covenants

In an earlier article on the subject of restrictive covenants (see http://www.vplaw.co.uk/content/item/news-and-updates/vp-news/latest-news/recent-guidance-on-restrictive-covenants-in-employment-contracts.html) I wrote about the case of Prophet Plc v Huggett. To recap, in this case the employer Prophet Plc (“Prophet”) drafted a restrictive covenant which prevented the employee from selling Prophet’s software after leaving employment.

This clause was very badly drafted: it was meant to restrict the employee from selling ‘similar’ software, because in this case it was obvious that only the Prophet sold their own products.

In the High Court the clause was allowed to be redrafted, because without this rewording the clause would have no practical effect.

However, the Court of Appeal has now reversed this decision saying that the clause itself was clear, just very badly drafted. Prophet is therefore stuck with the covenant and lost the case.

This case represents a return to traditional restrictive covenant law where the courts will not redraft covenant for employers. It also highlights the need to take specialist advice when drafting new employment contracts to make sure that any restrictive covenants will be enforceable for the particular employee.

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