Enforceability Of Restrictive Covenants To Be Assessed At The Time An Employment Contract Is Entered Into

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...