Workplace Report June 2007

Features: Law Contracts

Non-competition clause

Case 1: The facts

Huw Thomas was managing director for insurance broker Farr plc. He resigned as a result of a proposed change to his job following a company restructuring, which he claimed was a breach of his contract. He then accepted a job offer from a company that intended to compete with Farr.

Thomas's contract with Farr had contained a clause preventing him from working with competitors for 12 months after the end of his employment in any geographical area he had been involved with over the previous year. When he brought a claim in the High Court for breach of contract and constructive dismissal, he also argued that the non-competition clause was an unreasonable restraint of trade and therefore unenforceable.

The ruling

The Court of Appeal upheld the High Court's ruling that the non-competition clause was enforceable. In deciding whether such a clause goes too far, it said, the court must consider the nature of the proposed employment at the time the contract is entered into, and the kind of information the employee will have access to.

Because Thomas had been appointed as a managing director, he was going to have access to information that would have to be kept confidential after the end of his employment. In particular, he had pricing and financial information that would be valuable to a competitor in undercutting the company. In these circumstances, the Court said, the clause was not too wide.

Thomas v Farr and another [2007] EWCA Civ 118 ([2007] IRLR 419)