Law at Work — February 2014: reasonableness and extent of restrictive covenants did not apply to actions as a minority shareholder

In the case of East England Schools CIC (trading as 4myschools) v Palmer and another [2013] EWHC 4138 (QB), the High Court had to consider whether non-solicitation and non-dealing restrictions for a period of six months after termination of employment were enforceable. The issues raised concerned the validity of restrictive covenants, including whether the increasing use by teachers and schools of social media and the internet means that the employer no longer has any protectable connection with its customers. Also considered was the extent to which a shareholder of a competing company can be bound by such restrictions.

Contractual terms restricting an employee’s activities after termination are void for being in restraint of trade and contrary to public policy. This is unless the employer can show that it has a legitimate proprietary interest that it is appropriate to protect and the protection sought is no more than is reasonable having regard to the interests of the parties and the public interest.

Ms Palmer was employed by an educational recruitment consultancy, 4myschools, as a recruitment consultant who matched teacher applicants with schools in the Essex area. Her employment contract contained non-solicitation and non-dealing covenants that prevented her from soliciting or dealing with candidate teachers or client schools for a period of six months after termination with whom she had dealt in the 12 months prior to the termination of her employment. Those covenants were expressed to extend to actions carried out by Ms Palmer, not merely on her own account, but also ‘as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever’…

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