Restrictive covenants, which seek to impose restrictions on an employee’s activities after he leaves employment, are often a subject of litigation. They will normally only be enforceable in an employment situation where they are necessary to protect an employer’s legitimate interest and go no further than is reasonable in doing so. They will often seek to prevent employees approaching or dealing with customers, or working for competitors, usually within a defined geographic area. They are also invariably for a limited period of time.
As by their very nature, what is reasonable will depend on the role the employee did, the product or service the employer provided and so on, restrictive covenants should be drafted with care and tailored to the individual circumstances. If they are too wide, the courts will generally not enforce them. However, rather than always striking out entire restrictions where only a part of the covenant is too wide, the courts have adopted what is known as the “Blue Pencil Rule”. Under this rule, the courts have been willing to delete words where to do so would lead to the covenant being enforceable. So, for example, if a restriction purported to prevent a former employee from working for a competitor in West Sussex, East Sussex, Hampshire and Surrey, the Court may consider that to be too restrictive. If however by deleting Hampshire and Surrey the Court would have found the restriction to be enforceable, they can delete those areas – notionally by putting a line with a blue pencil through the offending words.
In the recent case of Prophet plc v Huggett  Mr Huggett was subject to a restrictive covenant which prevented him from competing with, or working for a competitor of Prophet. An additional sentence in the contract qualified this restriction by defining what competition would mean, which was that it related to the provision of computer software systems for the fresh produce industry produced by Prophet. Mr Huggett left his employment with Prophet and moved to a competitor company. Prophet sought to enforce the covenant.
Mr Huggett argued that the restrictive covenant was irrelevant as the restriction was related to the provision of computer software systems for the fresh produce industry produced by Prophet. Clearly, on a literal reading of the restrictive covenant, it was meaningless and Prophet accepted that the competitor company would never provide software systems produced by them and therefore the covenant would not afford them protection.
The High Court rejected the employee’s assertion that the covenant should be construed to say what it said. Instead, the Court concluded that by adding three words to the covenant, that would reflect its true meaning, and the covenant should be read so as to read software systems produced by Prophet “or similar thereto”. The Court granted Prophet an injunction to enforce the covenant.
The case is unusual in that the Court felt that the drafting was an obvious error, and as such it had the right to interpret the wording to give it the meaning which it felt was clearly intended. This is a first instance decision, and although this particular decision may not be appealed, it will be interesting to see whether this case illustrates a way for the Courts to correct drafting errors and effectively avoid the Blue Pencil Rule which only allows for words to be deleted, not added.
It is of course best not to make drafting errors and have the argument. At Pure Employment Law we have considerable experience in drafting restrictive covenants, and therefore if you believe your business is worth protecting from the activities of former employees, it is worth getting in touch with us.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).