Duarte v The Black and Decker Corporation & Anor

A post-termination restriction is enforceable only to the extent reasonably necessary to protect a legitimate business interest. A covenant covering a worldwide corporate group, including non-competing businesses and sectors in which the employee had no material involvement, may be invalid for excessive width. Under the Rome Convention, a side agreement containing employment restrictions may be a contract of employment, but the ordinary English law of restraint of trade is not a mandatory employee-protection rule under Article 6.1. Nevertheless, Article 16 may prevent an English court from applying foreign law where enforcement would be manifestly incompatible with English public policy. Severance is unavailable where removing parts of the covenant would change the character of the bargain.

The claimant resigned from employment with the second defendant and intended to join a competitor. His participation in a long-term incentive plan was conditional on two-year worldwide restrictions: a non-compete covenant covering companies and corporate groups listed in a schedule, and an anti-poaching covenant covering all employees of the defendants’ group.

The agreement selected Maryland law. The claimant sought declarations that the covenants were unenforceable. The defendants counterclaimed for injunctions enforcing them and separately alleged that the claimant had dishonestly copied confidential information for use in his new employment. The issues included the applicable law, enforceability under Maryland and English law, severance, and the alleged copying.

1. Applicable law. The LTIP agreement was a contract of employment for Article 6 purposes, although it was separate from the claimant’s principal employment contract. It formed part of the overall employment package and Article 6 could not be circumvented by placing employment-related obligations in a side agreement.
2. The mandatory rules protected by Article 6.1 were specific employee-protection provisions, such as those concerning employment rights and industrial safety. The English law governing restrictive covenants was part of the general law of restraint of trade and contract, and was not such a mandatory rule. Maryland law therefore remained the prima facie governing law under Article 3.
3. Article 16 nevertheless applied. If the covenants were valid under Maryland law but invalid under English law, enforcing them in England would be manifestly incompatible with the public policy of the forum. The English rule against unreasonable restraint of trade was directly engaged.
4. Maryland law. The relevant inquiry required a legally protectable interest, reasonable necessity in scope and duration, no undue hardship, and consistency with public interest or public policy. The non-compete covenant was far wider than necessary. It covered about 500 companies worldwide, including non-competing businesses and sectors unrelated to the claimant’s principal confidential information concerning European professional power tools. The covenant was unenforceable.
5. The anti-poaching covenant was also too wide because it covered all 25,000 group employees, regardless of seniority, business segment or location. It could be severed from the LTIP agreement as a whole, but that did not save the non-compete covenant. Maryland’s strict divisibility approach applied; the defendants had not proved that the flexible approach would be adopted.
6. English law and copying claim. The same non-compete and anti-poaching covenants were unreasonable under English law. Severance was unavailable because the non-compete was a single covenant and removing companies from the schedule would change the character of the agreement. The evidence did not justify an inference that the claimant had dishonestly copied confidential information for use with the competitor.
7. The claimant succeeded. The defendants’ claims for injunctions were dismissed, and the claimant was entitled to a declaration that the restrictive covenants were unenforceable.