Legitimate Restrictions?

The thorny issue of restrictive covenants has been recently covered by the courts.

In the case of Beckett Investment Management Group v Hall the Court of Appeal considered the enforceability of post termination restrictive covenants. The judgment gave some significant messages for those who want to incorporate restrictive covenants in contracts of employment, particularly in the Financial services sector:

• The first is that clauses should be construed sensibly without a purist approach, so this should be borne in mind when drafting.
• The second was that a restriction of 12 months may be enforceable, but careful note will be taken of
  • the employee’s seniority and importance; and
  • evidence about business patterns for customer repeat business; and
  • evidence concerning the logistics of replacing the employee; and
  • evidence about industry standards for restrictive covenants for comparable employees
  so again this should be borne in mind when drafting.
• Thirdly, it was made clear that definitions should, wherever possible be uncomplicated and narrow.
• Fourthly, severance of an unreasonable provision is possible if certain conditions are met, obviously a fallback position if you are dealing with a provision that you had no hand in drafting.

PILONs

Directly related to the issue of restrictive covenants, the Inner House of the Court of Sessions has held in Morrish v NTL Group that payment in lieu of notice (PILON) clauses cannot be implied into contracts of employment. This is directly relevant in a case where an employer does not want an employee to remain in employment or on garden leave during a notice period, yet wishes to take advantage of a post termination restriction. Employers should therefore take care that appropriate clauses (either garden leave provision or PILONs) are incorporated into senior contracts of employment.

Advance warning

In a change to usual protocol, Prime Minister Gordon Brown announced the government’s draft legislative program for the next session of parliament (this is usually revealed at the time of the Queen’s speech at the state opening of parliament)

Among the provisions is the Employment Simplification Bill (hopefully it will do what it says on the label). At this stage its main aim is to repeal the much loathed statutory dispute resolution procedures. It will take into account the Gibbons Review of workplace dispute resolution and bring together a number of issues that the Department for Business Enterprise and Regulatory Reform (formerly the DTI) has been consulting on in recent months. Watch this space for updates as to substance.

Protecting Data

The Information Commission has recently published his annual report and stated

“The roll call of banks, retailers, government departments, public bodies and other organisations which have admitted serious security lapses is frankly horrifying”

He goes on to call for privacy to be given more priority in every UK boardroom and for business and public sector leaders to take their data protection obligations more seriously.

The Information Commissioner’s office recently launched a crackdown on recruitment and employment agencies It has also published a data protection strategy which is intended to be a reference point for Commission staff in all their data protection work and sets out how the Commissioner intends to bring about good practice in areas such as the unlawful trade in confidential personal information. Comments are invited by 28 September 2007, and those interested in the outcome should certainly consider submitting their views.