Non-solicitation clauses in their contracts must be taken seriously
Recently, a company director who lured away a string of his ex-employer’s prime customers within days of being made redundant and in breach of his contract has been ordered to pay £50,000 in damages.
The man’s employment contract contained a restrictive covenant which forbade him from soliciting the company’s customers for six months after his departure. However, he had been instrumental in setting up a competing venture which was incorporated the day after he left and which swiftly succeeded in poaching the five customers.
Although he denied breaching the covenant, a judge had described him as a ‘deeply unsatisfactory witness’ who had ‘deliberately sought to mislead the court’. The evidence against him included 135 phone calls and 175 texts passing between him and the relevant customers in the period immediately before and after his departure.
At the Court of Appeal, the man’s lawyers, whilst not challenging the judge’s factual findings, argued that the restrictive covenant was too broadly drafted, amounted to an unreasonable restraint of trade and was thus unenforceable.
Dismissing the appeal, however, the Court noted the man’s own evidence that he had acted as the public face of the company and that at least a fifth of its client base had been built up through his ‘pizzazz’. His senior role had involved much contact with clients and there was nothing unreasonable in the company seeking to protect its position for a relatively brief period following his redundancy.
Also rejecting arguments that the £50,000 award was arbitrary and unjustified, the Court upheld the judge’s ruling that this was ‘the minimum’ financial loss that the company had suffered due to its former director’s breach of covenant.