Tom James UK Limited v Max Potter

Post-termination restraints in employment contracts are enforceable only so far as they are reasonably necessary to protect an identified legitimate business interest. An employer must particularise the confidential information or business connection relied upon and prove the necessity of the restraint by reference to the parties’ position when the covenant was made.

Customer buying cycles do not, by themselves, establish the necessary duration of a non-compete covenant. The relevant evidence may instead concern the time needed for a replacement employee to contact customers and rebuild relationships, together with the practical difficulty of policing narrower restraints. A covenant covering wider roles, businesses, territories or group companies requires specific justification. A severable phrase may be removed, but severance cannot save a covenant which remains excessive in scope or duration.

The claimant employed the defendant as a salesperson selling made-to-measure and related clothing. After the defendant resigned, the claimant alleged breaches of duties of good faith, fidelity and confidentiality and sought enforcement of a 12-month non-compete covenant in the 2022 employment contract.

The defendant denied the alleged breaches and challenged the covenant as wider than the corresponding six-month restriction in his 2017 contract. The issues included the construction of the covenant, the legitimate interests requiring protection, reasonable necessity, and severance of offending words.

The court therefore had to determine whether the alleged contractual breaches were proved and whether the non-compete restraint was enforceable.

1. Claim dismissed. The defendant had not breached his duties of fidelity, good faith or confidentiality. The evidence did not establish solicitation, improper dealings, deliberate reduction of sales, unreasonable failure to assist with handover, or unreasonable delay in returning information.
2. The court applied the three-stage approach stated in TFS Derivatives Ltd v Morgan [2005] IRLR 246: construe the covenant; identify the employer’s legitimate business interest at the date of the contract; and decide whether the restraint went no further than reasonably necessary, considering the contract as a whole, the factual matrix and both parties’ interests.
3. The only proved legitimate interest was customer information, including contact details, measurements and personal preferences. The claimant failed to particularise valuable confidential management information, pricing strategies, margins, product plans, sales methods or other alleged confidential material. Employee skill, experience and general know-how could not be restrained merely to prevent competition.
4. The 12-month duration was not shown to be reasonably necessary. The defendant’s role had not changed, the notice period remained one month, and the 2022 covenant applied on a one-size-fits-all basis. Evidence of buying cycles was retrospective, affected by outliers and did not establish the time required to rebuild customer relationships. The claimant also failed to prove that the narrower non-solicitation and non-dealing covenants were difficult to police.
5. The covenant was excessively wide in relation to the roles prohibited, the range of competing businesses, the geographic scope and the group companies included. The court construed “material involvement” as focused on the claimant’s London operation, but the remaining restrictions were still unjustified.
6. The words “or intends to be” were severable under Egon Zehnder Ltd v Tillman [2019] ICR 1223; [2019] IRLR 838. Their removal did not save the covenant, which remained unenforceable. The interim injunction was discharged, while the defendant’s undertakings continued.