12 month non-compete clause held to be enforceable

The High Court has held that a 12 month non-compete clause in a service agreement prevented a solicitor from joining a competitor.

In 2016 the employee became a shareholder and signed a shareholder agreement. This prevented her from being "engaged, concerned or interested in, or assist, a business which competes, directly or indirectly, with a business of the Company" in a territory in which the Company has operated in the previous 12 months. Effectively this clause sought to prevent the Claimant working in England & Wales in relation to any business the firm was involved in. The court held this was wider than reasonably necessary to protect the firm’s legitimate business interests and was therefore unenforceable.

However, in 2021, she signed a service agreement, following a substantial pay rise. This prohibited her from being involved in any business which was in competition with the parts of the firm that she had been involved in to a material extent in the 12 months preceding termination. The court held it was clear that the Respondent had shown themselves to have legitimate business interests to protect and that the covenant was drawn no wider than reasonably necessary and was therefore enforceable. An injunction was granted.

The case demonstrates the need for reasonable drafting when dealing with post-employment restrictive covenants, but may change when the government’s response to the consultation on non-compete clauses is finally published.

Law By Design Ltd v Ali.

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