It is an established fact in case-law that an employer does not have carte blanch to impose whatever restrictive covenants it likes. This was illustrated in the High Court judgement in Romero Insurance Brokers Ltd v Templeton & Anor  EWHC 1198.
An employer will often use a restrictive covenant to stop, for example, an employee leaving and going to work for a competitor and being allowed to approach their ex-employer’s client to persuade them to bring their business to the new employer.
In the Romero case, Mr Templeton worked for the company as an insurance broker. The employment relationship came to an end and, when Templeton joined his new employer, he sought to contact his old clients at Romero. His ex-employer sought a injunction against him to try and enforce a restrictive covenant.
Part of Templeton’s contract of employment was a clause which imposed a 12 month restriction on Mr Templeton doing business with clients of Romero who had been one of their clients in the last six months and with whom Mr Templeton had had dealings
As far as the High Court was concerned, “the only point in issue is whether the period of 12 months was more than was reasonably necessary to protect Romero’s business connection with its clients with whom Mr Templeton was dealing.”
It was necessary for Romero to prove that the covenant was ‘reasonable’. If the restraint was greater than was reasonably necessary to protect that trade connection, it could not be enforced. For example, a blanket ban on Mr Templeton going to work for any other insurance broker for a period of 12 months would not be enforceable.
However, a 12 month restriction is common in the insurance broking business in contracts with broker employees.
Mr Templeton did try and argue that the period of restriction was too long. He submitted there was an imbalance between the period of six months chosen as the period within which the client must have ‘done business with or been a customer or client’ of Romero, and the period of 12 months chosen as the length of the restriction. If six months for the one, why not six months for the other?
The Court reasoned that, as many insurance contracts are renewed annually and the renewal date is when a client is most likely to change brokers, the use of a 12 month restriction period was ‘reasonable’ under the circumstances.
Summing up, the High Court found that looking at the whole situation it was reasonable for Romero to seek to protect their client connection with a 12 month restriction against solicitation by Mr Templeton. The restrictive covenant clause was enforceable, although the High Court said they would not have upheld a longer clause.
Therefore, Romero were entitled to damages for breaches by Mr Templeton of the covenant occurring between his leaving Romero and the date of judgment.
The Romero case does emphasise that an employer needs to take care drafting restrictive covenant clauses to ensure they can be reasonably enforceable. Such clauses must do no more than protect an employer’s genuine business interests.
The Romero case did raise another interesting issue.
One of Templeton’s arguments was that he’d resigned and claimed constructive dismissal. This meant the employer had repudiated the contract of employment and thus the restrictive covenant clause, which was part of that contract, was unenforceable due to the breach.
The legal test, as to whether Romero were in breach, was “whether, looking at all the circumstances objectively, that is from the perspective of a reasonable person in the position of an innocent party, the contract breaker had clearly shown an intention to abandon and altogether refuse to perform the contract.” (Eminence Property Developments Ltd v Heaney  EWCA Civ 1168)
The High Court found that there was no repudiation of Mr Templeton’s contract by Romero, and that there was no constructive dismissal. But it does beg the question, that if the Court had found Romero in breach whether they would have accepted that the restrictive covenant clause was unenforceable?
The Supreme Court in Societe Generale v Geys  UKSC 63 dealt with the implications for enforcing contractual obligations where such arose after the termination of the employment relationship.
Specifically, the Supreme Court recognised that restrictive covenants do not depend on the existence of the employment relationship, and can be enforceable following an employee’s termination.
However, the Supreme Court also recognised that: “The enforceability of, for example, a restrictive covenant by the repudiator against the innocent party is now the subject of some debate.”
Therefore, if an employer wrongly and/or unfairly dismisses an employee without notice and refuses to pay them in lieu of notice to which they are entitled, the employer has clearly repudiated the contact of employment [i.e. the employer has “shown an intention to abandon and altogether refuse to perform the contract”], it is very unlikely that a restrictive covenant clause could be enforceable by the ex-employer.
This is not the case where the employment relationship has ended because the employee resigned (through no fault of the employer). It might be the case where the employee claims constructive dismissal, but this will all depend on the particular facts.