Inconsiderate Variation

The Case: Re-Use Collections Limited v Sendall & May Glass Recycling Limited

In the case of Re-Use Collections Limited v Sendall & May Glass Recycling Limited, the court was asked to consider if valid consideration had been given to support a new restrictive covenant introduced during the course of employment. The court decided that no consideration had been given and it refused to uphold restrictions, which in any event, it found to be unenforceable for other reasons. However, the court did find that Mr Sendall had acted in breach of his contract of employment and awarded damages to his former employer.

The case highlights the need to ensure that when changes to terms of employment are proposed an employee should be given something real and of value in exchange for the obligations in the new contract, particularly where restrictions are being introduced.

Any valid contract requires the parties to give each other something to support their agreement. This "something" is referred to in legal terms as "consideration". In commercial contracts, the courts have tended not to assess the value of any such consideration, recognising that the parties are best place to determine for themselves the relative value of the bargain. This legal doctrine of consideration also applies to contracts of employment and variations to such contracts. But as is often the case the legal principles that apply to commercial contracts are not always applied in a similar fashion to employment contracts. This case highlighted that there is no conclusive view as to whether the court is required to judge the adequacy of the consideration relied on to support the change to employment terms. However, the court appeared to favour the view that the consideration needed to be adequate particularly when considered in the context of introducing restrictive covenants.

Generally at the start of employment consideration can be easily ascertained. Even after the commencement of employment the court will usually try to assist employees to find consideration to uphold a contractual promise from the employer. For example, where an employer offers a salary increase to an employee, what does the employee give in return for this improved employment term? The employee does not offer to work harder or to work longer hours in return for the salary increase but the promise to pay can be enforced. So, the court once held that the consideration given for a wage rise was the employee's decision...