Law

1 Introduction

In this case both Bill and Brenda are experiencing legal problems regarding their contracts of employment. I have been asked to advice both of them on the law of restrictive covenants. In this essay I aim to provide clear advice on how they should over come their problems.

2 Restrictive Covenants

Restrictive covenants is where the ability to work after you leave a job is constrained. Where ever the person in question pleases to work, who they please to work for or if the new position is connected to the field of work with their previous employer is forbidden under restrictive covenants. Contracts in restraint of trade are void, however restrictive covenants are enforceable if they can be shown to be unreasonable in the interest of the parties e.g “Worldwide restriction was reasonable………interim interdict renewed” and unreasonable in the interest of the public e.g “attempt to prevent existing his existing customers being enticed away” .

3.0 Bill’s Legal Problem

Bill works for a company called Worldwide Pharmaceuticals Plc. He has been offered a position at Global Pharmaceuticals Plc. However he is concerned that his contract restricts him for working for trade competitor for two years should he leave Worldwide Pharmaceuticals Plc.

Worldwide Pharmaceuticals are seen to be unreasonable. They don’t want Bill to work for another company, which specialises in the same area of trade they do for a time period of two years. This is unreasonable, as Global Pharmaceutical plc has offered Bill a far more lucrative salary than he receives at Worldwide Pharmaceuticals. Bill has been with Worldwide Pharmaceuticals for five years. His contract may contain a clause for stating that a competitive salary is in place, if this is the case then the company Worldwide Pharmaceuticals who have not offered to match the rival company’s offer, and then they have breached the contract making the contract void. Bill’s existing employers are being unreasonable by requiring Bill not to accept the job.

Bill should appeal that the contract and the time period is unreasonable. Also that if however the courts decide the contract is reasonable then Bill should appeal that Worldwide Pharmaceuticals should offer him a more competitive salary i.e. they should raise his salary to that of which was offered to him by Global Pharmaceuticals. Worldwide Pharmaceuticals may argue that Bill had access to confidential information of their company regarding Bill’s research but they must show that Bill had access to such information. It must also be shown that Bill’s knowledge was obtained from trade secrets. However Bill could show that his knowledge came from other sources, which would reject any legal threats made by Worldwide Pharmaceuticals.

3.1 Area Of Law

The area of law displayed here under restrictive covenants of contract law is restraint of trade, which are usually void but can be enforced if “restriction is reasonable in terms of area and time” . Restraint of trade clause is only valid and enforceable by the principles if it is in writing, only covers the geographical area, the group of customers and the goods covered by that commercial agent, and lasts for no longer than a two-year period after the termination of the contract. Main point to note is that being in the field of work that he is i.e. research chemist, Bill would be a legitimate target for a restrictive covenant .

3.2 Remedies

Worldwide Pharmaceuticals are entitled to attempt to protect their legitimate business interests so long as the restrictions imposed are no wider than necessary to achieve such protection.

However, as Lord President Clyde pointed out in ”The mere exclusion of competition never can be in itself a legitimate interest” .

Worldwide Pharmaceuticals could gain an interdict for Bill which is a court order that would prevent Bill from working for Global Pharmaceuticals or any other organisation within the two year time period set in Bill’s contract after leaving their company.

They could also appeal that Bill should not disclose any of their trade secrets to the rival company. Bill is a research chemist any he could take of his discoveries to rival firms thus disclosing Worldwide Pharmaceuticals trade secrets, therefore they could take the necessary action to prevent this.

4.0 Brenda’s Legal Problem

Brenda