It is this unreasonable conduct that could be the subject of dispute and raise the issue of whether the dismissal was fair, but changing. (2) The Courts have shown a willingness to uphold restrictive covenants which are part of an agreement for sale of a business5 but this is not the case with restrictive covenants in employment contracts, which are scrutinized closely by the Courts. As Lewis points out, the restraint of trade doctrine, wherein a person has a right to pursue his occupation freely, imposes limitations on what may or may not be acceptable within the scope of a restrictive covenant. 6 In accordance with Lord McNaughton’s speech in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd7 the basic rule is that any kind of restraint of trade is void, hence an employer cannot protect himself against competition by imposing a restrictive covenant on an employee, especially after his employment has ceased.
The Courts will examine the terms of the restrictive covenant to assess whether the circumstances justify such restraints being placed on the employee. Hence the successful drafting of a restrictive covenant may require a “good deal of legal know-how. ”8 Some rules have been established by the Courts on restrictive covenants.
One of these is that it should not be too wide in scope, so that the trade restrained must be only to similar businesses, which compete seriously with it. For example, in the case of Way v Bishop9a solicitor could not be restricted in accepting employment as a clerk to another solicitor. Also, a restrictive covenant can only operate within a particular geographical area where the Company functions and cannot be imposed on a very wide ranging basis10.
The restrictive covenant can also operate only for a specified time period; in the case of Allied Dunbar (Frank Weisinger) Ltd v Weisinger11 a twenty four month period for a restrictive covenant was upheld. The absence of a time limit in a restrictive covenant will not necessarily deem it invalid, provided it is otherwise reasonable12. On a general principle, the restraint of trade as signified in a restrictive covenant may not be acceptable. However, Balmoral may be able to demonstrate to the Court that it is justified in imposing a restrictive covenant, due to the damage that is being done to its business interests. 13 Moreover, the imposition of the restrictive covenant per se may not be a subject that Ali can legally contest, because it was issued during the period of his employment, when it is valid for an employer to require him not to engage in anti competitive practices involving other companies.
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