Skip to main content

Insight article

June 30, 2020

Non-Compete. Get it right to protect against competition

Companies looking to protect their business by relying on non-compete clauses for key employees should check that any post-termination restrictions are reasonable.

When an employee leaves, and there is a threat of commercially sensitive information about operations and customers being passed to a competitor, the non-compete/restrictive covenants in the employment contract are effectively the safety net in protecting know-how and business relationships.

A recent case heard in the High Court has shown that while the court will enforce non-compete clauses, restrictions must go no further than protecting legitimate business interests. It also highlighted the importance of being clear about any so-called ‘garden leave’ where employees work out their notice period at home.

In Square Global Limited v. Leonard, a broker was required to give six months’ written notice. The employment contract also contained a restriction on him working for a competitor for six months after the end of his employment. When he immediately handed in his notice and left to work for a competitor, his former employer relied on the employment contract. In response, the broker claimed he had been constructively dismissed, arguing that this released him from his obligation to give notice and the non-compete clause.

The High Court upheld the employer’s argument. It said that the six-month non-compete clause was reasonable and went no further than necessary to protect the employer’s legitimate business interests. It was, therefore, enforceable. The court also decided that the broker was required to serve out his six-month notice period on top of the six-month restriction, keeping him out of the market for a total of 12 months.

This compares with a case in 2014, Ashcourt Rowan Financial Planning Limited v Hall, where the High Court held that a restrictive covenant designed to prevent a former employee from working for a competitor for six months was unenforceable because the covenant was too widely drawn, going beyond protecting the legitimate business interests of the employer to be in restraint of trade. The High Court found that the covenant was not confined to what was reasonably necessary and covered indirect involvement without any obvious justification.

The law has always regarded a covenant ‘in restraint of trade’ as being void because an individual should be free to follow his trade and use his skills without undue interference. Such clauses are, therefore, only enforceable if they are strictly limited to what is necessary to protect a business.

Employment partner Karen Cole said:

“This is a reminder that employers need to ensure that non-compete clauses and other restrictive covenants are reasonable and focus on activities which would involve the employee directly competing with their old employer. Trying to do a catch-all is impossible to enforce.

Garden leave and how or when that might be offset should also be tackled. What’s important is that any restrictions are carefully drafted and checked at the outset.”

Contact employment partner Karen Cole today if you have an employment law query.

Note: This is not legal advice; it provides information of general interest about current legal issues.

Stay in touch

Subscribe to our newsletter

Stay in touch

By completing your details and submitting this form you confirm you are happy for us to send you marketing communications and that you agree to our Website Privacy Policy and Legal Notice and to us using Mailchimp to process your data.


Sending

News/Insight

  • The do’s and don’ts of using AI in your business
    AI can help businesses improve efficiency and make informed decisions, but it also comes with risks. Explore the key do’s and don’ts of using AI responsibly, including data protection, legal considerations and the importance of human oversight.


    Read more
  • Next equal pay appeal: when can market pressures justify different pay
    When can recruitment and retention pressures justify different pay? Karen Cole explores the Next equal pay appeal, explaining why equal pay risks remain and what employers should consider when reviewing pay packages and the evidence supporting their


    Read more
  • Domestic Abuse Protection Orders: where are they available and what other protection can you seek?
    Domestic Abuse Protection Orders can offer tailored protection, but availability is currently limited. Pippa Marshall explains how they work, who can apply and the other protective orders available, including non-molestation and occupation orders.


    Read more
  • Missing beneficiaries and unknown heirs: what should executors do?
    What should an executor do if someone entitled to inherit cannot be found? James McMullan explains how to trace missing beneficiaries, the limits of statutory notices and the options to consider before distributing an estate.


    Read more
  • Pay transparency in recruitment: Is your business ready to disclose salaries?
    Employers may eventually have to provide salary information much earlier in the recruitment process under proposals being considered by the Government.


    Read more

What they say...

  • Bryan E, September 2026
    Absolutely outstanding “This firm is super professional, efficient and friendly at the same time. You could not wish for a better service. I have used them for my Will and a range of other matters over many years. I’ve found all the vario

  • Jan Norris, September 2026
    Excellent Service “Charlotte Barbaroussis has prepared our wills, LPAs and a discretionary trust. She was professional, kind and patient throughout. A very fine person to have looking after us.”

  • Brian Nunan, August 2026
    “I dealt with the group for many years, and no matter which solicitor I used, the results were always the same. Excellent!”

  • Client, July 2026
    Constructive and empathetic “I contacted Pippa Marshall at RIAA Barker Gillette through a recommendation regarding a family law matter. Pippa was always clear, efficient, empathetic and helpful, offering constructive insights on my situation. I

  • Dino, July 2026
    A lucky professional meeting! “We had an excellent professional experience to recommend to all those who need legal help in the UK.”

Read more
Send this to a friend