In the recent case of Safetynet Security Ltd v Coppage and another [2012] EWHC B11 the Mercantile Court reminded us that the law in regard to restrictive covenants was a balance between protecting the goodwill of a company against restricting the future employment prospects of the former employee. Essentially the test is similar to that employed in EU law where any restrictions are decided by asking if they are a proportionate means to achieving a legitimate business purpose.
The case also reminded us that the restrictive covenant must be individually tailored to suit each employment relationship. Generally the more involved the employee is with the company (taking into consideration the size of the company, number of branches, size of client base, role in the company etc), then the more likely the court will that the restriction is enforceable.
In this case Safetynet provided security services, Mr Coppage was their former director and had signed a restrictive covenant which prohibited him from soliciting customers or individuals of Safetynet for a period of 6 months following his termination. Mr Coppage terminated his employment following possible redundancy. The next day after his termination a company called Freedom Security Solutions Limited was incorporated by another very recent former employee of Safetynet. Very soon after this five of Safetynet’s clients moved their business to Freedom Security.
Safetynet claimed against Mr Coppage and Freedom for breach of Mr Coppage’s restrictive covenant, the claim was brought on the basis that Mr Coppage was the directing mind of Freedom. Mr Coppage defended the claim on the basis that the covenant was unenforceable.
The Court disagreed with Mr Coppage and found that as a result of Mr Coppage being such a key figure in Safetynet the covenant was enforceable. Furthermore it found that Mr Coppage was the directing mind of Freedom and so the covenant would extend to incorporated bodies which he had control over. The Court may not have found against Mr Coppage if he hadn’t have been such a key person in Safetynet.
The Court awarded Safetynet £50,000 in damages, although Safetynet originally claimed over three times this amount.
At Benchmark Solicitors we can assist in all employment matters and any restrictive covenants which effect you. Please do not hesitate to call our employment team.
Paul Rogers, Solicitor – 28th September 2012