Non-Compete
Particularly in professional and company Employment Contracts, employees will sign Non-Compete Clauses, otherwise known as Restrictive Covenants; also known as Restraint of Trade Clauses. On attaining employment the employee will be required to sign his Contract. He will not feel confident enough to decline to sign the Non-Compete Clause. When it comes however to him moving to a new employer will that Non-Compete Clause prevent him from moving?
In the High Court case of Levinwick Ltd -v- Hollingsworth [2014] IEHC 333 (High Court, McGovern J, 4 July 2014) the Court refused to enforce a non-compete clause in a Kildare-based pharmacist’s contract with his former employer on the basis that the nature and extent of the restriction was more than was reasonably necessary to protect the goodwill of the employer’s business.
The Facts
Non-compete
The plaintiff (“employer”) owned and operated a pharmacy in Cellbridge. The defendant (“employee”) was a former employee who left in March 2013 when he took up employment with another pharmacy in Cellbridge in January 2014. His former employer claimed that the employee was in breach of non-compete clause in his Employment Contract. The employer sought a Court Order enforcing the terms of contract.
The Law on Restraint of Trade
McGovern J stated that restraint of trade clauses are, prima facie, not enforceable at common law. Such clauses are only enforceable if they protect legitimate business interest and are no wider than reasonably necessary. In particular, covenants against competition by former employees are rarely enforceable and are only upheld where the employee has personal knowledge of, and influence over, customers of employer. The actual role of the employee in employer’s business is crucial. What is crucial is whether the nature and extent of the restriction no more than reasonably necessary to protect goodwill of employer. The onus is on the employer to show that the contract term was no more than was reasonably necessary.
The Court`s Decision
Termination of Employment
In this case the employer had said that the employee was the “face” of the pharmacy. The employee however stated that the employer had overstated the extent of his personal relationship with its customers.
The Court found that the evidence of employer fell some way short of showing employee was face of business. While there had been a drop in business at employer’s pharmacy since employee’s departure this was attributable in large part to other factors, such as the fact that 3 other pharmacies had been set up in the town. The non-compete clause could not be used by the employer simply to protect its goodwill. Accordingly, the Court refused the reliefs sought by employer and dismissed the employer`s Claim.