Restrictions post employment

Case 10: The facts

Simon Morgan, an equity derivatives broker specialising in one financial market, was regarded as extremely competent in his job and had built up good relations with clients.

Morgan's employment contract contained a "restrictive covenant" restricting the type of work he could undertake following the termination of his contract. It said that he could not do any work for six months that was in competition with "or similar to" the employer's business.

Following his resignation, Morgan was offered work with a competitor, and his original employer began proceedings against him to enforce the restriction. Morgan claimed that the clause was unenforceable because it was too wide.

The ruling

The High Court held that the phrase "or similar to" was the only section of the restraint clause that was too wide; however, these words could just be severed, leaving the rest of the clause to be fair.

The court held that, for a restrictive covenant to be enforceable, the employer must show that it has legitimate business interests to protect, and the clause must go no wider than is necessary to protect those interests.

TFS Derivatives v Morgan [2005] IRLR 246