Covering off the risk of a departing employee

Romero Insurance Brokers v Templeton Ltd provides a recent example of the successful use of restrictive covenants in the insurance industry. Although only a first instance decision, it provides a useful guide to what to do — and what not to do — when seeking to ensure that an outgoing member of staff does not leave with his or her entire set of client connections.

In this case Mr Templeton had been required to sign a suitable contract of employment with carefully drafted restrictive covenants. He had been recruited on the basis of his personal following, and so was required to enter into a non-solicitation covenant for 12 months after the end of his employment. Its scope was limited to clients with whom he had had dealings in the previous six months.

Restrictive covenants are not enforceable unless they go no further than is reasonably necessary to protect the employer’s trade connection with the customers with whom the employee has been dealing. In deciding that the test was satisfied in this case, the judge took into account that the 12-month restricted period correlated with the normal renewal period for most types of insurance. Although other factors were in play, this case comes pretty close to saying that a 12-month non-solicitation covenant will normally be reasonable in the insurance industry…

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