It is often the case that employers will seek to introduce Restrictive Covenants into employment contracts in order to protect their business should an employee leave, either on their accord or via company procedures, notably termination or redundancy. It is very important that both employers and employees have a clear understanding as to what terms they can introduce as Restrictive Covenants prior to entering into them. If terms are seen as too onerous or go further than is necessary to protect legitimate business interest then they can be a restraint of trade. If clauses are seen as a restraint of trade then they will be void and unenforceable.

Clauses possibly void

This is based on the presumption that an individual should be free to follow his trade without undue interference. So a term seeking to restrict such actions will be void unless it is no wider than reasonably necessary and designed to protect a legitimate business interest.

Whether a clause amounts to a restraint of trade will turn on the facts in particular circumstances. For example, it will be easier to justify a longer Restrictive Covenant for an employee who is more senior and subject, for example, to confidential or sensitive information. The clause will be seen as a restraint of trade if it is purely designed to prevent competition by a former employee, it has to be justified on the grounds highlighted above. In the case of Marshall –v- NM Financial Management Limited a clause stating that an agent was entitled to commission only after the termination of the relation if he did not compete with the company, was seen as restraint of trade and unenforceable.

Reasonableness

An employer will have to show that any restraint of trade clause is reasonable and only goes so far as is necessary to protect a legitimate business interest. The reasonableness of a particular restraint of trade clause will depend on the facts, and the test will be on the expectation of the parties at the time that the contract was entered into, and not at the time when the issues arise post termination.

The Courts will also consider geographical location and duration. For example, a restraint of trade call seeking to enforce a 3 mile radius upon which an employee cannot work, is more likely to be reasonable in a rural location are as opposed to central London.

The Courts have recognised that restraints of trade are appropriate in certain circumstances. They may also be appropriate on business sale. A company will seek to protect the goodwill, trade secrets, client base and staff, so it is right and proper that they have a mechanism in order to do so.

Summary

Employers need to consider this carefully when entering into a contract. Employees also need to consider it before agreeing to contractual terms and should review it again on termination.  It is often the case that employees are simply unaware of the constraints by which they are bound and any breach could mean legal action being taken against them.

Employers can seek to enforce a restraint of trade clause either by taking out an injunction or bringing an action for loss of profit. There has been recent case law in this area, particularly in relation to team moves. If one employee seeks to move to another company and/or set up his own business then he needs to be extremely careful when other employees join him. If he has a restrictive covenant preventing soliciting or enticing away existing staff, then he may be in breach. The key would be whether he has taken proactive steps to encourage existing to move and on the facts based on his working relation and the new company.

The restraint of trade test will also apply to covenants in joint venture agreements as well as employment contracts and business/share acquisition agreement.

From a company’s point of view, if they are seeking enforce a restrictive covenant or restraint of trade then they will need to do so with significant evidence to confirm a breach. It is expensive to bring an injunction and any action must be accompanied by sufficient evidence. A company will always have to taken into account what is at stake and how important it is for them to prevent further damage to their business.

This article courtesy of Ben Jones, Partner and head of employment law at Darlingtons Solicitors.

This would be where an employer treats an employee less favourably because of a disability. The employee would need to highlight a relevant comparator i.e. a colleague in a similar position without a disability. If they are unable to do this they can rely on a hypothetical comparator.

Indirect Discrimination

Applying a provision criterion or practice that disadvantages employees with a disability without justification, this would include general work policies or procedures which placed disabled employees at a significant disadvantage.

Reasonable Adjustments

Where an employer has or should have knowledge or disability then they are required to make reasonable adjustments if a worker is placed at substantial disadvantage. There is some guidance provided in relation to the Equality Act 2010 as to what amounts as to reasonable adjustments. Generally speaking they include issues such as adjustments to premises, providing information in accessible formats, transferring the disabled person to fill an existing vacancy, altering hours or training, acquiring or modifying equipment, providing supervision or other support and/or modifying work procedures.

Victimisation / Harassment

It is unlawful under the Equality Act 2010 to victimise or harass an employee in relation to their disability.

There is a statutory defence open to employers in certain circumstances, so that is if they have taken reasonable steps to prevent such conduct from taking place in their office. They would need to show that they have undergone, for example, appropriate training of staff and monitoring of any complaints or grievances raised. They would also need to show that they have taken appropriate steps to deal with such issues. As well as employers being liable for any disability discrimination there is also potential for a personal liability for those employees who carried out such treatment.

Under the Equality Act 2010 a person is a disabled if they have a physical or mental impairment, and impairment has a substantial and long-term adverse effect on their ability to carry normal day to day activities (Section 6(i)).

If there is any dispute as to whether the employee is disabled or not then they should be assessed first of all by an occupational health professional. If they subsequently bring a claim then may be the need to obtain a medical report to determine whether or not they are covered by the Equality Act 2010.

The condition must be more than minor or trivial or the standard is relatively low, but it must have a substantial adverse effect on their ability to carry out day to day activities.

It therefore important that employers establish at an early stage whether someone is disabled for the purposes of the Equality Act 2010 and if they are, they must act in accordance with those provisions and the guidelines / protections outlined. If there was any long-term sickness / absence then they must manage that properly as well, and to determine whether the condition amounts to disability, in which case they have obligation to consider reasonable adjustments in order to facilitate a return to work.

Discrimination in relation to employees is now covered by the Equality Act 2010.  Sex is one of the protected characteristics under the legislation.

Under the Act, there are four types of discrimination defined, these are direct and indirect discrimination as well as harassment and victimisation.

Under the Equality Act 2010 an employer will be in breach if they discriminate directly or indirectly against an employee on the basis of their sex. Direct discrimination is treating an employee differently from another simply because of their sex. Indirect discrimination is applying or implementing a policy that disadvantages an employee or applicant simply because of their sex without justification.

Other breaches under the Act include an employer subjecting an employee or applicant to sexual harassment or treating an employee or applicant less favourably because they rejected or submitted to an act of harassment. The Act also ensures that an employer is not able to victimise a job applicant or employee because of their sex.

There are certain occasions in which sex discrimination is permitted under the Act, these include jobs in which there is an occupational requirement or whereby positive action is required to address gender inequalities that may already be in place in a business.

Other exceptions in relation to sex discrimination include safeguarding national security, where the employer is concerned with providing benefits to the public, insurance contracts and communal accommodation.

For the purposes of the Act, any act perpetrated by an employee will be deemed to have been committed by the employer. This is regardless as to whether the employee’s acts were committed with the knowledge or approval of the employer. This rule is similar for principal and agent relationships whereby a breach of the act committed by an agent is deemed to have been committed by the principal; this is also regardless as to whether the principal had knowledge or approval of the breach.

Employers at times can also be liable for sexual harassment which is committed by third parties. This could be a customer or supplier or any other third party which an employee will come into contact with during the course of their employment. For the employer to be liable it has to be shown that they did not take appropriate steps to prevent the third party from committing the harassment.

If an employee wants to bring a sex discrimination claim they can submit questions to the employer in order to better ascertain as to whether they have a claim or not. These questions can be submitted to the employer before a claim is submitted or within 28 days of a claim being submitted to the Tribunal. The questions do not have to be answered by the employer, however, the Tribunal is entitled to draw an inference from a non-reply by the employer. These questions and answers are admissible in evidence at the Tribunal.

A claim for sexual discrimination has to be brought to the Tribunal within three months of the date to which the complaint relates.

If an employee brings a successful claim in the Tribunal, they may make one or more orders. These orders include a declaration of the rights of the parties, compensation and an appropriate recommendation from the Tribunal as to what steps the employer should take to reduce the adverse effect of sex discrimination.