Take care when painting non-compete clauses with a broad brush
Protecting hard-won local customer networks is a constant and necessary battle for commercial suppliers. However, a recent High Court judgement has exposed the risks inherent in employing standard ‘boilerplate’ contracts to restrict departing sales staff. The dispute in focus was triggered when a national building supplies merchant sought final injunctions against its former area sales manager. Under the terms of his contract, the defendant was defined as a peripatetic area sales manager responsible for high-value client accounts across the local regions. The contract was subject to a standard one-week notice period during a probationary window, yet also contained extensive post-termination restrictions, including a 6-month, geographically defined non-compete covenant, alongside a 12-month confidentiality clause.
During the course of his employment, the defendant had regular access to the merchant's digital management systems, which record customer transaction histories, pipeline projects, and a variable pricing hierarchy. Some months later, the defendant resigned from the merchant under the presumed obligation of three months' notice with a view to joining a direct competitor as an external sales manager to help launch their new regional branch.
The defendant’s previous company learned that regional clients on the departing manager’s sales ledger were being actively engaged. Specifically, the merchant referenced a professional networking exchange between the defendant and a buyer for a prominent local construction company, during which the defendant directed the buyer's representative to reroute quotes through his new employer. Fearing an immediate loss of its localised trade connections, the merchant issued a formal legal claim and successfully secured an interim injunction to enforce both the 6-month non-compete covenant and a temporary confidentiality restriction.
The High Court, however, dismissed the employer’s claims, declaring the non-compete covenant void and unenforceable, while further rejecting the application for a final confidentiality injunction. The Judge’s assessment focused on fatal drafting flaws in the agreement, specifically the dismantling of a contractual "carve-out" intended to allow the employee to work in non-competing areas. Moreover, the former employer attempted a belated "blue-pencil" deletion to alter this exception. However, the High Court ruled that an employer cannot retroactively rewrite a relaxation clause to limit a former employee's freedom.
The High Court also applied the "Quilter point," confirming that, as the manager could have been dismissed at a week's notice during his initial probation period, applying an immediate 6-month blanket ban from ‘day one’ was fundamentally disproportionate. Finally, the Court ruled that the pricing schedules listed on the company’s internal software were merely artificial screen prices. Given that genuine commodity prices fluctuate rapidly due to global market forces, regional builders routinely and openly share competitor quotes to drive down costs. Thus, the departing manager possessed no memorable or stable trade secrets which could have been unlawfully exploited.
If boilerplate trade protections are structurally inconsistent, geographically bloated, or syntactically flawed, they will be struck down entirely under employment law, leaving client databases open to exploitation. A non-competition restriction is only as strong as the internal consistency of your wider framework, and seeking to retroactively expand a post-termination boundary to include marginal outlier accounts will likely backfire.
If an organisation reserves the right to terminate an introductory employee at a week's notice, any attempt to lock that individual out of the job market for 6 months will likely be viewed as an unlawful restraint of trade, and so corporate counsel must structure agreements using variable, ascending tiers of restriction that directly correspond to the employee’s actual length of service and seniority.
