Restrictive covenants: the perils of seeking undertakings that differ from the contractual provisions

Restrictive covenants: the perils of seeking undertakings that differ from the contractual provisions

The recent case of Affinity Workforce Solutions v McCann & Ors is a salutary tale regarding the difficulty of enforcing restrictive covenants when undertakings have been sought that are narrower in scope than the original contractual restrictions.

It is well established that restrictive covenants are enforceable to the extent that they are drafted only as widely as necessary to protect a legitimate business interest. This is to balance the restraint of trade on the individual, against the reasonable and legitimate needs of the business.

When employees leave and there is a risk that they will or have breached restrictive covenants owed to their former employer, most commonly the former employer will ask the departed employee to enter into undertakings to confirm that they will cease to or not act in breach of any covenants.

Facts

Affinity Workforce Solutions is a recruitment agency. Eight former Affinity employees had gone to work for a competitor. In the weeks following their departure, Affinity wrote to the employees and sought undertakings from them to confirm that they would not act in breach of their covenants regarding dealing with or soliciting Affinity’s clients or candidates. It did not seek any undertakings with regard to a non-compete restriction. The employees negotiated amendments to the undertakings and, eventually, signed them. Two days after the employees signed the undertakings, Affinity issued proceedings and sought an injunction to enforce the non-compete restriction.

Decision

When considering the application for an injunction, the court considered where the “balance of convenience” lies. That is, is the granting of an injunction going to be more of an injustice to the departed employee than the risk of a continued breach of a restrictive covenant to the former employer if it was not granted? The court made it clear that the burden of showing why it would be “unjust or inappropriate to grant such an injunction lies on the employee”.

The court considered that an injunction should not be awarded in this case. Affinity had spent a great deal of time negotiating with the former employees to enter into undertakings that were of much narrower scope than the restrictive covenants contained within their contracts of employment. In so doing, Affinity had demonstrated that its legitimate business interests could be protected by much narrower covenants than those it sought to enforce.

The court also took into account the fact that the former employees had been working with the competitor for a significant period of time, during which the undertakings were being negotiated, before Affinity attempted to enforce the non-compete restriction. The “balance of convenience” therefore fell in the employees’ favour, as an injunction preventing them from working with the competitor would have proven more of an injustice to them, than any potential injustice suffered by Affinity if an injunction was not granted.

Comment

Employers do sometimes seek undertakings of a narrower scope than those originally contained within an employee’s contract of employment, as an incentive for a firm assurance that the business’ interests will remain protected. This case is a reminder that where undertakings are sought in open correspondence (that is correspondence that is discloseable in evidence to a court) which are narrower in scope, it may serve as evidence in the employee’s favour that the original covenants are wider than necessary to enforce the employer’s legitimate business interests. Asking for more limited undertakings therefore risks the enforceability of the original covenants.

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