Restraining ex-employee competition: recent cases highlight key steps for employers

Recent cases have highlighted the importance of employers ensuring that employees' contracts of employment and job descriptions are kept up to date as their role changes, and that post-termination covenants are revised appropriately.

• The Court of Appeal has confirmed that the scope of the duty of fidelity and the existence and scope of any fiduciary duty will be determined by an employee's contract of employment. Where there are no express duties in relation to developing clients in a specific market sector, it will not be a breach of the duty of fidelity to discuss future plans to set up a competing business with potential clients in that sector or to fail to disclose these discussions. (Ranson v Customer Systems plc, CA)
• The High Court has ruled that, where a restrictive covenant was unenforceable at the time it was agreed in light of the employee's then role, it remained unenforceable regardless of the employee's promotion to a role for which the covenant would be reasonable unless there was explicit re-agreement of that term. A general acknowledgement in the promotion letter that the previous terms remained unchanged was insufficient. (Patsystems Holding Ltd v Neilly, HC)
• Employers wishing to enforce restrictive covenants should ensure the relevant employees are subject to a commensurate notice period and that their superiors are also subject to appropriate restrictions. A failure to do so will undermine any argument that there were legitimate interests to protect. The High Court has also held that, in relation to enforcing covenants against ex-employees domiciled in another country, it is not possible to get round the requirement for claims against an employee to be brought in their court of domicile simply by framing them as a tortious claim for conspiracy or inducing breach of contract. The jurisdictional protection for employees applies to both claims arising out of the employment contract and non-contractual claims where the status of the defendant as an employee is "legally relevant" to the claim in question. (CEF Holdings v Mundey, HC)