In the recent High Court case of Quilter Private Client Advisers Ltd v. Falconer and another  EWHC 3294 (QB) found that the non-solicitation, non-compete and non-dealing clauses in a financial adviser’s employment contract were unenforceable.
In this case, Ms Falconer had recently started work as a financial adviser for Quilter. Her employment contract contained a 9-month non-compete clause and a 12-month non-solicitation and non-dealing clause. Just before her 6 month probationary period, where she was only subject to 2-weeks’ notice, she decided to leave and join a competitor. Quilter brought a breach of contract claim against both Ms Falconer and her new employer.
High Court’s decision
The High Court decided that the specific non-compete, non-solicitation and non-dealing clauses in Ms Falconer’s contract were an unlawful restraint of trade and not enforceable.
These clauses are often found to be unreasonable. The clause for nine months after the termination of her employment, sought to prevent Ms Falconer from working for a competitive business. It was found that it was unreasonable that Ms Falconer could have been with the business for a very short period of time, only built up a small amount of clients and then left, but still be bound by a nine-month restrictive covenant. As it would take some time to build relationships with clients it was unreasonable to restrain her for such a long period of time, particularly as she was still in her probationary period.
Non-dealing and non-solicitation clauses
The non-dealing and non-solicitation clauses were for 12 months after she left employment and stopped her from dealing with or taking away clients of Quilter whom she had personally dealt with in the last 18 months before she left. Interestingly the 18 months “backstop” was found to be too long and Quilter could not explain why the legitimate interest being protected required such a long backstop.
Non-solicitation and non-dealing clauses in contrast to non-compete clauses are often found to be reasonable but you must make sure that you draft them carefully so they are not too wide.
This case shows the difficulty employers face when striking the balance between an effective restrictive covenant and one that is not unnecessarily onerous. When drafting such clauses, a business must consider the legitimate interest to be protected and whether the covenant does any more than is really necessary to protect that interest.
Don’t just apply a “one-size-fits-all” approach to covenants without considering whether or not it is actually suitable for the employee in question. They should be tailored so they are proportionate to different groups of workers or seniority levels.
Employers might also want to think about providing for shorter and more limited covenants during the probationary period, especially where the notice entitlement is reduced or simply accept it may be difficult to enforce a covenant during the trial period.