Non-solicitation Covenant Covering All Customers Upheld as Reasonable
A non-solicitation covenant prohibiting an employee from approaching anyone who was a customer at any time during his employment was enforceable.
In Safetynet Security Ltd v Coppage, C was Business Development Director of a small business providing security services. His contract contained a six month non-solicitation provision preventing him soliciting any individual or organisation who during his employment had been a customer of the company. The High Court held that the restriction was enforceable. C had solicited customers in breach of the restriction and was ordered to pay damages of £50,000.
C appealed to the Court of Appeal, arguing that the non-solicitation clause was unreasonable and ought to have been restricted to current customers (i.e. those who were customers in the last six/twelve months of his employment). The Court of Appeal disagreed. It noted that 98 out of a possible 106 customers remained current at the time C left. Although the covenant was wide in terms of its scope up to termination and the customers it covered, the duration of the restriction post –termination was only six months. It considered this a powerful factor in assessing the overall reasonableness of the clause. In addition, C was a key employee who had contact with all of Safetynet’s customers, indicating that he had the power to influence all customers with whom he had come into contact, both past and present.
The Court of Appeal also rejected C’s argument that the restriction was unreasonable as it was feasible that he could have worked for Safetynet for (say) six years, have worked with a customer for two weeks at the start of his employment and then be prevented from soliciting them years later. This was despite the fact that case law makes it clear that the reasonableness of a covenant must be judged at the date it is entered into.
Post-termination restrictions are only enforceable in so far as they protect a legitimate interest of the employer, such as their customer base, and go no further than is necessary to provide that protection. Non-solicitation covenants will therefore normally be drafted so that they only cover customers with whom an employee has dealt during a specified period prior to termination. However, each case must be considered on its own facts and as this case demonstrates, a more widely drafted covenant may be upheld if a company has a small stable client base and the employee has contact with all the customers.
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