Post Termination Restrictions: Always Consider Consideration

The recent case of Re-Use Collections Ltd v Sendall [2014] EWHC 3852 (QB) is a timely reminder to employers everywhere of the importance of providing meaningful consideration when attempting to tie-up existing employees with new post-termination restrictions.

If you don't, the risk is that no matter how well drafted your restrictions are, they will be worthless when you come to enforce them, allowing your - by now - ex-employee to walk away scot free to compete with you, pinch your staff and cajole your customers away.

The facts

Mr Sendall had worked for Re-Use Collections for a number of years with a basic written statement of employment particulars in place (despite his seniority and importance to the business). Eventually Mr Sendall was asked to sign a new contract which contained a number of post-termination restrictions (including a non-compete, non-solicitation of clients and employees, non-dealing with clients and a ban on setting up a competing business). He was not keen to sign up to the new contract and sought legal advice, before eventually signing, a number of months later.

Mr Sendall then left Re-Use. The circumstances around his departure are too lengthy to go into here, but suffice to say that he was accused of working to set up a competing business with his sons and poaching Re-Use's clients and suppliers into the bargain. Matters came to a head in a heated disciplinary meeting with Re-Use, and Mr Sendall resigned.

The dispute

The two parties then became embroiled in a lengthy and costly legal dispute around Mr Sendall's behaviour. A court granted Re-Use an interim injunction, and eventually the matter came to a full hearing. The Judge, who did not have any complimentary things to say about the parties, made findings on a wide range of matters, including Mr Sendall's implied employment duties, alleged fiduciary duties, contractual duties, and a counter-claim by Mr Sendall for constructive dismissal (which failed).

For our purposes, the key finding that the Judge made was whether the restrictions contained in Mr Sendall's contract were enforceable by Re-Use against him. In reaching the conclusion that they were not, the Judge focussed on the lack of meaningful consideration from Re-Use for the restrictions which had been introduced during employment, and held that this meant they were unenforceable. The Judge made this finding despite holding elsewhere that Mr Sendall had breached his duties and contractual terms in other...