News & Views

Is a 12 month non-competition restrictive covenant enforceable?

Yes says the High Court in the case of Merlin Financial Consultants Ltd v Cooper!

In this case, a ‘goodwill’ agreement between an employer and a financial adviser contained a restrictive covenant preventing the financial adviser from ‘competing’ with the business of the employer for 12 months post termination.  The Court found that 12 month post termination restrictions were common in the financial services industry, noting that there was an exceptionally strong relationship between the financial adviser and clients of the employer’s clients.

Is a restrictive covenant enforceable in UK law?

The Court made the distinction that the ‘goodwill’ agreement was more similar to a business sale agreement than an employment contract, the difference being that the parties to a business sale agreement are generally viewed to have more equal bargaining power.

This case, which follows an earlier decision in Prophet Plc v Huggett, is a helpful reminder that the Court is more willing to enforce post termination restrictions not only in business agreements, but may also indicate a move by the Court to enforce such restrictions in employment contracts – this will depend on the nature of the business and the surrounding facts.

For any further information, please contact commercial litigation solicitor Gemma Newing who is based in St Albans, Hertfordshire, and London.

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