Post-termination restrictions: Prophet plc v Huggett

Those clients who attended Collyer Bristow’s recent seminar on post-termination restrictions will be aware of the importance of drafting these restrictions with great care. As explained at the seminar, any ambiguity in the wording of a restriction will be interpreted against the party who drafted it, so an employer seeking to rely on such clauses should make its meaning very clear. Post-termination restrictions, especially non-compete clauses, are onerous obligations; they interfere with a departing employee’s ability to earn a living. The wording of the restriction should be such that the employee should be able to know with absolute certainty exactly what he can and cannot do.

Even if the clause is clear, it may still be struck out. If the judge’s view is that the restriction is too onerous, then they will simply strike out the clause. They will not rewrite it to something that they consider would be reasonable. The only exception to this is the ‘blue pencil test’, named after the Victorian method of making tracked changes on a document. A judge may delete some words or entire clauses with his metaphorical blue pencil. If what remains makes sense, and is not an excessive restriction, then the clause will be allowed to stand. However, under this rule a judge can only strike words out; he cannot introduce new wording or rewrite the relevant provision.

The recently reported case of Prophet plc v Huggett is a surprising exception to this rule. In this case, Mr Huggett left his employer, Prophet, a software company, to work for a competitor. He had a non-compete covenant in his employment contract, but due to an error in the drafting the wording of the covenant made no sense. It prohibited a departing employee from working in a competing business ‘in connection with any products… which he was involved while employed’. An employee would only have been involved in working with Prophet’s own software products. On leaving to join a competitor, they would of course not be working on the same products, but perhaps equivalent competing products of the new employer. This is what the non-compete clause had been intended to cover, but the mistake in the drafting meant that, on a literal interpretation, the clause offered no protection whatsoever…

Click on the link below to read the rest of the Collyer Bristow briefing.

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