Restricting where your former employees work can be reasonable says High Court
The High Court has held that it was reasonable for a hairdressing salon to prevent a former employee from working within half a mile of its premises.
The High Court has held in the case of Hanna Ltd v Barber and another that it was reasonable for a hairdressing salon to prevent a former employee from working within half a mile of its premises and granted an injunction to enforce this.
However it also ruled that the hairdresser could not be prevented from advertising his services on social media.
The claimant, Mr Barber, had been employed by the Respondent as a hair stylist for six years. His employment contract stated that he could not work within a half-mile radius of his employer’s salon for six months after the end of his employment. It also prevented him from ‘inducing’ any of his former customers at the salon to use his services for the same period.
After his employment ended Mr Barber rented space very close to his employer’s business and started working there on a self-employed basis. He advertised his services via social media and in a local magazine.
When a number of his former employer’s clients left its services to use his instead, the salon sought an injunction to prevent him from breaching the restrictions in his employment contract.
Mr Barber accepted that he was in breach of the geographical restrictions in his contract but argued that he had not ‘induced’ customers to leave the salon. He was adamant that he had simply advertised his new services on a website in a way which ‘incidentally’ came to his former clients’ attention.
The High Court found that the employer’s stipulation that Mr Barber should not work with the very close geographical radius of half a mile from their premises was reasonable and could be enforced by an injunction.
However, it refused to grant an injunction to enforce the ‘inducement’ clause. The evidence showed that a number of clients had already left the salon’s services and so granting an injunction would be ineffective. Furthermore, it felt that preventing him from announcing his new business via social media would be an unlawful restriction on the hairdresser’s right to carry out his business. He was at liberty to conduct his business from premises outside the prohibited geographical area and his former employer could not prevent him from promoting his services.
What does this mean for me?
When a key member of staff leaves your employment you may worry that they will take valued clients or customers with them. This case reinforces the fact that there are steps your business can take to protect itself or at least ‘soften the blow’. However those steps have to be in place before the employee decides to leave.
While an employer is not entitled to impose a restriction simply because it does not want an ex-employee to compete with it, it can seek to stop that person from damaging its legitimate interests. In this case for example the employer managed to at least partially protect its local customer base by drawing a circle around its premises within which its former employee could not compete.
Aside from custom, think about what else an employee might take with them when they leave. It is possible to put contractual restrictions in place to protect anything of real commercial value to your business – for example your customer database or a particularly crucial relationship with a client or supplier.
However, this case is also a reminder that, in a social media age, it is more difficult than ever to restrict what employees can do and with they can communicate with after they leave your employment.
It is relatively unusual to see a case at this level involving a hairdressing business. More often, cases relating to the enforcement of restrictive covenants involve sectors traditionally seen as highly competitive such as banking, financial services or sales. However, this case is a reminder that the loss of a popular employee can pose a very real commercial risk to a business of any type or size.
Any attempt to restrict in an employment contract what an employee may do after their employment has ended will be enforceable only if it is ‘reasonable’. This principle will include the geographical scope of the restriction, the period of time it covers, and the breadth and type of activities that are prohibited. To determine what is reasonable, a Court will look at the particular nature of the employer’s business and the employee’s position within that business. It is notable that, in this case, the geographical restriction was only enforceable for a period of 6 months. A longer timeframe may well not have passed the ‘reasonableness’ test.
If you want to put in place restrictions on a member of staff’s commercial activity after they leave your employment it is important to carefully consider exactly what you want to achieve. Precise drafting is also essential to avoid any ambiguity. Seek legal advice to make sure your interests are properly protected.
Stuart Jones is Head of Employment and Pensions at Weightmans LLP (firstname.lastname@example.org).