Court of Appeal upholds restrictive covenant relating to employee

The Court of Appeal has upheld a restrictive covenant preventing a former employee from working for a rival until 12 months after the end of his contract.

Mark Aspin Director and Head of Dispute Resolution reports on this recent case.

The case involved NZP Ltd, which developed and produced bile acid derivatives for sale to pharmaceutical companies for use in their products.

One of its senior employees, Mr Boydell, was responsible for the global sales and marketing for the group of all bile-derived products. He resigned and indicated an intention to work for a competitor.

Clause 3.1 of his employment contract provided that he would not for 12 months after termination be involved in any activity for the benefit of a third party that carried out any competing business activity of the company, its affiliates or group companies, including collection, processing or conversion of bile for pharmaceutical use, and any activities related to the supply chain.

NZP obtained an interim injunction to enforce cl.3.1.

Boydell appealed, arguing that a restraint on being involved in any capacity with any third party which competed with the former employer’s business, whether or not it was in the same field of activity as when he was working for them, was too wide in principle to be enforced.

The Court of Appeal dismissed his arguments. It held that Clause 3.1 prohibited him from being involved in any activity for the benefit of any third party that carried out any business activity that would compete with the business activity carried out by NZP.

For more information about the issues raised in this article please contact Mark on 01228 516666 or click here to send him an email.