Do short notice periods undermine the enforceability of restrictive covenants?

• Although Huws Gray had legitimate interests in protecting customer relationships and confidential information, the non-compete clause went further than was reasonably necessary to protect those interests.
• The court heard evidence that Mr Gentleman was responsible for 103 customers by the end of his employment. The employer argued that he had built up strong relationships with those customers and had access to confidential information relating to them. But the covenant was not limited to preventing him dealing with those customers or using confidential information. Instead, it prevented him from being employed by a competing business in any capacity including roles with no connection to customer relationships or where he could use confidential information.
• Huws Gray also failed to justify why the six-month restriction applied from day one, even though Mr Gentleman was subject to a six-month probationary period during which his employment could be terminated on one week’s notice. An employee who left after only a few weeks would have had little opportunity to build meaningful customer relationships.
• The judge noted that Huws Gray had attempted to include a non-solicitation and non-dealing covenant to protect customer relationships. However, that provision was unenforceable because key terms had not been defined. The employer could not justify a broad non-compete clause simply because a more targeted restriction had been poorly drafted.
• Other employees with similar or greater access to pricing information, including assistant branch managers, were either not subject to non-compete restrictions or were subject to shorter restrictions. This undermined the employer's argument that a six-month covenant was necessary to protect confidential information.

The court therefore concluded that the covenant was wider than reasonably necessary to protect the employer's legitimate business interests and was an unenforceable restraint of trade.

Key lessons

Restrictive covenants are only enforceable if they are carefully drafted and proportionate to the interests they are intended to protect. 

To avoid problems we recommend that you: 

• Review restrictive covenants regularly. Restrictive covenants are judged by reference to the circumstances that existed when they were agreed, not when you seek to rely on them. If an employee’s role or responsibilities materially change, consider whether updated restrictions should be agreed.
• Don't overlook probationary periods. Consider whether the same restrictions should apply during an employee's probation, particularly where you can terminate their employment on short notice. A lengthy non-compete is likely to be difficult to justify where an employee could leave before having time to build meaningful customer relationships or acquire confidential information that needs long-term protection. This issue is likely to attract greater scrutiny once the new six-month qualifying period for unfair dismissal rights takes effect on 1 January 2027. If you shorten probationary periods to address performance or conduct concerns before those rights arise, you'll need to be able to justify why lengthy post-termination restrictions should apply from day one. One option is to provide that a non-compete only applies after a certain period of service. Another is to impose a shorter period of restraint during the probationary period. 
• Use the right type of covenant. If your main concern is to preserve customer relationships, it's better to include a well-drafted non-solicitation or non-dealing covenant than a broad non-compete clause, as these are usually easier to justify.
• Ensure restrictions are consistent with the employee's role. It's harder to justify lengthy restrictions where employees with similar or greater access to customers or confidential information are subject to less onerous restrictions.
• Don't rely on the court to fix poor drafting. Key terms should be clearly defined and restrictions should be drafted carefully from the outset. Courts may sever limited wording, but they will not rewrite an unenforceable covenant.