August 20, 2014

Badly-worded covenants can hurt employers

The ruling in the recent Prophet vs Huggett case is a timely reminder for employers about the dangers of agreements that don’t stand up to scrutiny.

The case had come to court after Mr Huggett had decided to leave his role as sales manager for Prophet, a software developer to the fresh food industry, to join one of their competitors.

The Warwickshire-based business had resorted to legal action to try and enforce the covenant, while Mr Huggett’s lawyers argued that the wording of the non-compete clause didn’t make sense.

At the High Court, the judge was sympathetic to the business. He acknowledged the covenant was defective, but decided it could not have been the intention of the parties to come to a meaningless agreement and allowed the wording to be altered.

Now, however, the Court of Appeal has set the original judgement aside and ruled that a clause that does not provide protection to the employer could not be corrected by a judicial rewrite. Prophet is therefore powerless to stop Mr Huggett taking up the new role.

The case highlights the importance of businesses making sure that restrictive covenants are accurate and well thought out, to ensure they provide adequate protection.

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