Emma-Louise Hewitt, Head of Employment Law at Sydney Mitchell warns that employment contracts that remain unsigned may not be worth the paper they are written on when it comes to enforcing restrictive covenants. The point was resoundingly made by the High Court in a case whereby a large services company were unable to find one signed copy of a contract of employment with a senior employee after she resigned to allegedly, to join competitors.
The company claimed that its former operations director had breached a number of restrictive covenants in her contract which, amongst other things, forbade her from soliciting its customers or employees or in fact working for competitors for a certain period of time after her termination date. She claimed that she had been constructively dismissed and that, in any event, none of the covenants were binding on her.
In refusing to grant the company a pre-trial injunction against her, the Court noted that, despite being a major employer and having an extensive human resources department, it had remarkably failed to identify a signed copy of any of the three contracts the employee was said to have entered into. The obvious inference was that she had refused to sign the contracts that had sought to impose increasingly onerous restrictive covenants upon her as she climbed the ladder of seniority without any consideration.
There was a complete absence of evidence of any valuable consideration given to her in return for her agreement to the purported restrictions on her post-termination conduct. That was, on the face of it, fatal to the company’s claim and it had failed to establish that there was a serious issue to be tried. The starting point with any restrictive covenants is that all covenants in restraint of trade are accepted as being unenforceable at common law, unless they are reasonable with reference to the interests of the parties concerned and of the public.
For help or advice on this or other employment law matter, please speak to Emma-Louise Hewitt on 0808 166 8827.
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