A former MD of an insurance brokerage has lost his appeal that a clause in his employment contract was unreasonable and unenforceable in law.
Huw Thomas a former MD of Farr resigned following a company restructuring but then sought to work for a competitor.
He then sued his former employer for constructive dismissal (apparent demotion to a subsidiary company status), breach of contract and a declaration that the employment contract term prohibiting him working for a competitor was an unreasonable restraint of trade clause-the case in hand-Huw John Phillip Thomas v Farr Plc and Hanover Park commercial Limited.
Thomas argued other restrictive covenant clauses in the contract protected Farr adequately: not to solicit customers and not to disclose confidential company information.
He also argued the period of twelve months should be halved to six.
The appeal court judge said the non-solicit would only apply to Farr’s clients If he were to hold a senior position with the new company the approaches could be made by junior staff so that the protective measures could be easily circumvented.
The non-compete clause was necessary in order not to exploit Thomas’s knowledge.
Further the judge found in favour of the twelve month term in that this period would be a reasonable period for which the information would remain valuable.
The restriction was reasonable in scope as though Thomas was banned from his specialism as a broker of the social housing market he could nevertheless work in other insurance market sectors.
Each case is specific on its own facts and could not be said that the above formulates any general principle or law. The judge may have decided differently if Thomas had no other reasonable opportunity of using his skill in another related sector of employment or if he could not have got around the other restrictive covenants by delegating as he would have himself been doing the role and thus would have been “caught”.
Of note here was I think that the social housing insurance market was small and specialist-1500 housing associations of which 350 were Farr’s clients and about 20% of those clients were responsible for 80% of Farr’s income.
