Social media and restrictive covenants: Death by a thousand cuts?

JonathanGolden

Do the easy relationships and information available through social media limit an employer’s ability to enforce restrictive covenants? The good news for employers is that a recent High Court decision says that they do not.

The case relates to a recruitment agency which supplies teachers and is therefore of particular interest to the schools and recruitment agencies we represent, but the case has much broader application.

The judge held that non-solicitation (i.e. not poaching customers or staff) and non-dealing (i.e. not having any business contact with clients) restrictive covenants in the employment contract of a recruitment consultant were enforceable.

The reason was that the employer still had a legitimate interest to protect, despite the fact that recruitment information was widely available on social media.

Employment agencies can therefore take comfort from the fact that the wide availability of recruitment information on social media did not weaken the employer’s legitimate proprietary interest – in this case. The court also seemed to recognise that the fragility of customer loyalty makes it all the more vital for the employer to enjoy protection – in this case.

A number of practical points were made in this case:

  1. Neither schools nor teachers have loyalties to particular agencies (each register with several) and information about teachers is no longer confidential as it is freely available on the internet.
  2. Any loyalty which exists tends to be with an agency rather than an individual within the agency. However, that individual relationship (even with a junior employee) may be the deciding factor in an agency being used in preference to others.
  3. A restriction of 6 months stopping an employee dealing with any schools and candidates they had been involved with in the previous year was reasonable, even though this was a fast moving market and confidentiality was not a significant issue.
  4. The fact that relationships within the sector are fragile, made the need for protection, and any restrictions, more rather than less relevant.

A few technical points also came out of the case:

  1. As a result of threatening letters, the ex-employee had been forced to offer an undertaking not to deal with clients, but doing so in the face of the threat of litigation was not an admission by the employee that the restrictions are effective.
  2. The restrictions used the standard wording of the Recruitment & Employment Confederation – some of which were unenforceable as drafted – and the judgement confirmed that the courts can delete words to make a clause effective.
  3. We as lawyers are always trying to anticipate all eventualities, but care must be taken to make sure that provisions against competing, soliciting and dealing with customers cannot be triggered just because an ex-employee takes a minority stake in a competitor, as this could invalidate the restriction.

Conclusion: This is a helpful reminder that, although many things have changed in the way people now do business and in the collaborative and sharing nature of business relationships, with the use of LinkedIn and other social media, employers can still expect a sympathetic response from the courts if they have reasonable and well drafted restrictions in their contracts.

Here is a link to the actual case: http://www.bailii.org/ew/cases/EWHC/QB/2013/4138.html