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MacNairs + Wilson

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Can your employer stop you working for a competitor after you've signed a settlement agreement?

I have had to give advice to a number of clients recently in connection with Settlement Agreements, where employment is terminated by agreement usually for some enhanced payment to the employee. I have noticed that the employer will frequently attempt to retain its’ rights to enforce contractual provisions restricting future employment. These clauses are usually referred to as “Restrictive Covenants.” Many people wrongly assume that these clauses are not enforceable. This is absolutely not the case as companies are entitled to protect their legitimate interests from harm by a dishonest employee who intends to steal a company’s goodwill and business knowledge, built up often at great cost over a number of years. A recent decision, however, serves as a reminder that companies cannot always rely upon these clauses.

The High Court in London recently issued a decision in Bartholomews Agri Food Ltd v Thornton, refusing to implement a Restrictive Covenant clause. The Judge held that it was simply not reasonably necessary for the protection of the customer connection for Bartholomews to have imposed such a wide ranging covenant on the Mr Thornton. If the clause had provided that the employee could not, for 6 months, deal with or solicit customers with whom he had dealt for a period of time before the termination of his employment that would have been sufficient.

If an employer thinks that payment of a lump sum severance agreement makes the clause more likely to be enforced, then think again. The court specifically provided in this judgement that it is contrary to public policy in effect to permit an employer to purchase a restraint of trade.

This all serves to underline the care needed to be taken by both sides when considering the possibility of a restrictive covenant clause in either a contract of employment or a settlement agreement. It is important to take proper legal advice at as early a stage as possible and certainly before such agreements are signed.

Contact our Settlement Agreement Lawyers Glasgow & Paisley

For further advice on Settlement Agreements, get in touch with our expert employment solicitors. We can employment law advice to both employees and employers in Paisley, Glasgow and surrounding areas. Contact us today to find out how we can help.

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