Court of Appeal confirms validity of non-solicitation covenant despite its wide scope
The Court of Appeal recently upheld the decision of the Mercantile Court in Safetynet Security Ltd v Coppage to enforce a six month non-solicitation covenant which prevented an employee from approaching anyone who had been a customer during his employment.
Mr Coppage was the Business Development Director of Safetynet Security Ltd. His contract included a restrictive covenant stating that for six months following the termination of his employment, he would not solicit, directly or indirectly, any individual or organisation that was a customer of Safetynet during his employment. The covenant lacked the usual provision limiting the restriction to those customers with whom the employee had direct dealings during a specified period prior to termination, often six or twelve months.
Following a warning of possible redundancy, Mr Coppage resigned and set up a competing company. At least five of Safetynet’s customers moved their custom to his new business. The Mercantile Court held that Mr Coppage had breached his non-solicitation clause and ordered him to pay £50,000 in damages to Safetynet. Mr Coppage appealed, arguing that the covenant was too wide and therefore unenforceable. However, the Court of Appeal dismissed his appeal, confirming that both the scope of the covenant and the length of the restriction were reasonable. It was particularly relevant that Mr Coppage had been recruited specifically to be “the face” of Safetynet and most customers were personally known to him.
It is unusual for such a wide non-solicitation clause to be upheld, but it was found to be justified on the facts of this case. When assessing post-termination restrictions, a court will always look at all relevant circumstances including the employee’s role, the nature of the business and the particular market. This highlights the importance of tailoring restrictive covenants to individual employees in order to ensure that the interests of the business are properly protected.
06 Jan 2014