The recent case of Patsystems v Neilly is a reminder of the importance of keeping restrictive covenants under review. Mr Neilly's employment contract contained a 12 month post-termination non-compete clause. Five years later, he was promoted to Director of Global Accounts. Although his notice period was increased, he was not issued with a new contract of employment; instead, he was asked to acknowledge that all other terms of his employment would remain unchanged. Seven years on from his promotion, Mr Neilly handed in his notice in order to go and work for a competitor. Patsystems sought an injunction to prevent Mr Neilly doing so, which they alleged would be in breach of the non-compete clause.
Unfortunately for Patsystems, the High Court followed established case law in holding that the enforceability of the non-complete was to be assessed based on the situation at the time the contract was entered into. Given that Mr Neilly was in a junior role at this point, the non-compete was found not to be enforceable, and no injunction was therefore granted. The judge also commented that 12 months would in any case probably have been too long.
Comment: Employers will be best placed to protect their businesses if they consider carefully the drafting of any post-termination restrictions imposed on new hires, rather than adopting a "one size fits all" approach. These types of restriction also need to be reviewed at the point of any promotion – it may often be necessary to issue a new employment contract at this stage, rather than just a letter confirming the change in job title and salary.
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