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LPC Law Notes Employment Law Notes

Covenants In Restraints Of Trade Model Answer Notes

Updated Covenants In Restraints Of Trade Model Answer Notes

Employment Law Notes

Employment Law

Approximately 388 pages

A collection of the best LPC Employment notes the director of Oxbridge Notes (a former Oxford law graduate) could find in 2014 after combing through seventeen LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor". In short these are what we believe to be the strongest set of Employment Law notes available in the UK this year. This collection of notes is full...

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The following is a more accessible plain text extract of the PDF sample above, taken from our Employment Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Is the covenant likely to be enforceable against X? If so, what remedies would be available?
STRUCTURE

  • Explain the law in general, briefly

“A restrictive covenant restraining an ex-employee from working in a competing business or soliciting ex-customers is prima facie void as being in restraint of trade. An employer is not entitled to protect himself against competition as such; he must have an interest to protect”

  • Take each clause and employee separately and explain:

    • Whether the clause would address the employer’s concerns about this employee if it is valid

    • Whether the employer has a legitimate interest to protect for this employee

    • Whether the clauses are reasonable on these facts in terms of:

      • Subject matter (bearing in mind the employee)

      • Time (bearing in mind the subject)

      • Area (if relevant)

    • How the ‘blue pencil test’ could operate (strike out certain bits of the clause)

    • The employer’s remedies
LEGITIMATE INTEREST

  • The employer must have a legitimate business interest to protect. Legitimate business interests are:

    • Trade secrets or other highly confidential information which ‘if disclosed to a competitor would be liable to cause real or significant damage to the owner of the secret which the owner had tried to limit dissemination of’ (Lansing Linde Ltd v Kerr)

      • Example: Knowledge of special rates and discounts could potentially cause real or significant damage to the owner of the secret, as such prices could be undercut by the competing business or those prices could be disclosed to customers who are paying full rates

    • Trade connections (e.g. employers’ relationships with their customers and clients (goodwill)); the employer will have to demonstrate that a breach would result in actual or potential harm to the employer’s business (Jack Allen v Smith)

      • Example: Would X’s breach of the covenant cause actual harm to the company? Consider: Has he created close relations with the customers? Has he retained phone numbers/customer details? If so, the employee could use that information in a manner which causes harm to the employer’s business

    • The employer’s interest in maintaining a stable and trained workforce (Dawnay, Day & Co)
IS THE CLAUSE REASONABLE?

  • Is the clause reasonable in terms of:

    • Subject matter?

      • The clause must be no wider than is necessary to protect the employer’s business

        • Example: Companies that are not in direct competition with the employer – An owner of a coach company could not enforce a covenant preventing an employee working for a “coach company or any other tour operator” as this would be too wide to protect only the employer’s business. What about canal tours? What about tours abroad? They cannot stop the employee joining such companies as they are not direct competitors (this could give rise to ‘blue pencilling’ the latter part (see below))

        • Example: Excessively wide non-solicitation clause – An employer could not enforce a covenant preventing X from dealing with “anyone who has been a customer of, or dealt with, the employer” as this is too wide. This is as this is not just attempting to protect the employer from what X knows, it is going further and unnecessarily restricting X. The employer cannot exclude dealings with ALL customers, only the ones who X has dealt with directly (WRN v Ayris)

    • Time?

      • A time restraint in excess of one year can usually be justified only in exceptional...

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