Non-compete clause can be enforceable

Using the guidance given in TFS Derivatives Ltd v Morgan it applied the blue pencil test that you can only strike out or sever parts of a contract provided you do not change the sense overall.

 

The case is interesting in that the court rejected the employee’s argument that low salary was a relevant factor in considering the reasonableness of the non-compete clause. Her new employer’s interview notes also revealed that she was aware of confidential information and was willing to reveal it. Consequently new employers are advised not to make/keep such notes.

 

The employee in question, Adair (A), worked as a sales manager and had access to confidential information of NL.

 

Her contract contained a number of post termination provisions including a non-compete and a non-solicitation of customers and leads.

 

A resigned to work for PL and NL sought to enforce the provisions against A and the new employer PL.

 

Importantly the court decided the non-compete clause as worded was too wide and unenforceable as a whole whilst the non-solicitation clause in contrast could be saved by applying the blue pencil test above.

 

Although the restrictive periods for both terms were deemed reasonable the wording of the former was too wide as A was “concerned” with a great number of the employer’s products which varied from the material to the tenuous so this was unreasonably wide as was the period of 5 years to which this clause applied as sales related information pertaining to the same had a much shorter shelf life.

 

With the second non-solicitation provision relating to A’s “direct access to or dealings with” it was held to be too uncertain and ambiguous as was the reference to “prospective customer” but here the blue pencil case saved the remainder of the clause which could then stand and “bite”.

 

Norbrook Laboratories (GB) Ltd v Adair and Pfizer Ltd

 

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