Determining whether restrictions are enforceable

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This Overview outlines the Practice Notes available in our subtopic: 'Determining whether restrictions are enforceable'.

The combined effect of the implied duty of fidelity, any fiduciary duties owed by the employee and express restrictions on competition (such as garden leave clauses) and on the use of confidential information during employment contained in the contract of employment can protect the employer against competition while the employee is employed. Post-termination restrictions (also known as restrictive covenants) can provide effective protection to an employer against competition by a former employee.

However, the protection that such provisions afford will depend on the extent to which the relevant restrictions are judged by a court to be enforceable.

Usually, the enforceability of the relevant restrictions will be judged by a court at an interim hearing of an application by the employer for an interim injunction to enforce the restriction concerned.

The Practice Notes in this subtopic examine the enforceability of post-termination restrictions against employees. The principles applicable to the enforceability of post-termination restrictions against other individuals in commercial agreements (eg partners, consultants, shareholders) are similar but not the same and outside

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Latest Employment News

Employment weekly highlights—21 November 2024

This edition of Employment weekly highlights includes: (1) analysis from Darshan Patel of Old Square Chambers, Nicholas Chronias of DAC Beachcroft LLP, and James Wynne of Littleton Chambers of a Supreme Court decision on ‘check-off arrangements’ and whether a trade union has the right to sue as a third party for breach of an employment contract between the employer and employee, (2) an EAT decision on holiday back pay post-Agnew, (3) the Labour Market Enforcement Strategy for 2024 to 2025, (4) a Bill enacting changes to National Insurance Contributions, (5) an EAT judgment about the test to be applied when deciding whether a claimant with recurring symptoms has a disability, (6) the Bar Council’s response to the Bar Standards Board’s proposed amendments to equality rules, (7) an employment tribunal decision awarding compensation for failure to make reasonable adjustments for endometriosis and anxiety, (8) a call from the Social Mobility Foundation for mandatory class pay gap reporting, (9) results of a survey on discrimination faced by neurodivergent individuals during recruitment, (10) an EAT decision on an employment tribunal’s power to award non-pecuniary losses in whistleblowing detriment claims, (11) analysis by John Binns and Alexander Gorst at BCL Solicitors of the statutory guidance on the failure to prevent fraud offence, (12) an EAT judgment on strike-out, (13) the Senior President of Tribunals’ annual report for 2024, (14) minutes of the most recent meetings of the Employment Tribunals (England and Wales) National User Group and of the Employment Tribunals (Scotland) National User Group, (15) Regulations dealing with the recognition of professional qualifications from Switzerland in Wales, (16) the IRLR Highlights for December 2024, (17) dates for your diary, (18) updates to our case, consultation and legislation trackers and horizon scanner, and (19) a new Q&A.

Supreme Court unanimously finds that trade union can exercise third party rights under C(RTP)A 1999 to enforce check-off term in employment contract (Secretary of State for the Department for Environment, Food and Rural Affairs and others v Public and Commercial Services Union)

On 20 November 2024, the Supreme Court handed down its judgment in Secretary of State for the Department for Environment, Food and Rural Affairs and others v Public and Commercial Services Union (the Union). In a unanimous decision, in which Lord Sales and Lady Rose delivered the leading judgment, the Supreme Court upheld the appeal brought by the Union, and held that the Union were entitled to rely on third party rights under section 1 of the Contracts (Rights of Third Parties) Act 1999 (C(RTP)A 1999) to enforce a term in the relevant members’ contracts of employment providing for ‘check-off arrangements’, which was unilaterally removed by its members’ employers. The Supreme court confirmed the correct approach to applying C(RTP)A 1999, s 1(2) and held that, in the absence of an express term in the contract for enforcement by the relevant third party, as was the case here, where the relevant third party is identified as such in the contract and the term they seek to enforce purports to confer a benefit on them (satisfying C(RTP)A 1999, s (1)(b) and 1(3)), a strong presumption of enforceability arises as there is no express term stating the contrary. This presumption is only rebutted under C(RTP)A 1999, s 1(2), where it is shown that, on the usual objective approach to interpretation of contracts, the parties had a positive common intention that the obligation should not be enforceable by the third party. There was no indication of this in the individual contracts of the Union members in this case. Darshan Patel, barrister at Old Square Chambers (acting for the appellant), Nicholas Chronias, partner at DAC Beachcroft LLP, and James Wynne, barrister at Littleton Chambers, comment on the judgment.

Failure to prevent fraud—Statutory guidance

Corporate Crime analysis: Following a wait of nearly 12 months since the failure to prevent fraud (FTPF) offence was enacted, the government has now issued the statutory guidance on the procedures which companies are expected to implement for the purpose of preventing the relevant underlying fraudulent conduct by persons associated with them and, where such conduct occurs, providing a potential defence to the offence . Written by John Binns and Alexander Gorst at BCL Solicitors LLP.

CTJ publishes minutes for ET National User Group meetings

The Courts and Tribunal Judiciary (CTJ) has published the minutes of the Employment Tribunals (England and Wales) National User Group meeting held on 30 September 2024 and the minutes of the Employment Tribunals (Scotland) National User Group meeting held on 2 October 2024.

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