Many employees, particularly those in client facing roles have clauses in their contracts of employment known as post termination restrictions. These clauses are intended to restrict certain of an employee’s activities after the termination of their employment. Usually such clauses will cover non solicitation and non dealing with clients and non poaching or hiring of colleagues.
In the case of Towry EJ Limited v Barry Bennett & Others the High Court considered in some detail what ‘solicitation’ meant in a post termination non solicitation clause.
The High Court held that generally speaking that such a clause should mean:-
‘directly or indirectly request, persuade or encourage clients of their former employer to transfer their business to their new employer.’
The key question in the case, however, was how far did an employer need to prove that a former employee had solicited former clients in breach of such a non solicitation clause. The former employer in this case sought to argue that solicitation could be inferred from the ‘tidal wave’ of clients who had transferred across to the new business. However, there was no evidence of any request, persuasion or encouragement of those clients by the former employee.
The High Court held this was not sufficient; the employer had to be able to prove that clients had not moved across out of a sense of loyalty towards their former employee, rather than due to any persuasion or encouragement or request on his part. The Court emphasised that the burden of proof rests with the employer, which then meant it was placed in the extremely difficult position of potentially having to cross examine its former clients to obtain any evidence.
This case is a useful reminder that for those businesses where such clauses are important these clauses should be regularly reviewed. Due to the difficulty in ‘proving’ non solicitation a non dealing clause should always be included in contracts, which would prevent clients working with the former employee even if they wish to transfer their business to him or her. Had the former employer in this case had such a clause in its contracts the overall result could have been quite different!