Sickness absence can adversley affect restrictive covenants
Navigating the complexities of post-termination restrictive covenants can be a minefield for HR professionals.
A recent High Court decision has thrown a spotlight on the challenges employers face when attempting to enforce these covenants, especially concerning employees who have been on extended sick leave.
Case Overview
In the case of Dare International Ltd v. Stephen Soliman and Ashley Hikmet, Dare International sought to enforce non-compete clauses against two former Senior Traders, who had accepted positions with a competitor, Onyx Capital Management.
The Court’s decisions hinged significantly on the circumstances surrounding each employee’s departure.
Key Findings
- Employee 1 – Stephen Soliman: Stephen was on sick leave for the entirety of his 12-month notice period. During the time, he had no access to confidential information, did not engage in any work for Onyx and made no preparations to compete against Dare. The Court concluded that enforcing the non-compete clause would be unreasonable, because the employer (Dare) had already benefited from a year without competition due to the absence.
- Employee 2 – Ashley Hikmet: In contrast, Ashley’s situation differed markedly. His absence was found not to be due to genuine sickness; instead, he deliberately refused to attend work, breaching his employment contract. Furthermore, the employee was found to have engaged in preparatory activities for Onyx during his notice period, including disclosing confidential information and meeting with brokers. Given these findings, the Court granted an injunction to enforce the 12-month non-compete clause against the employee.
Implications for HR Professionals
This case highlights that assessing individual circumstances is critical for HR teams. Absence periods before termination need to be taken into account, as they will be by the Courts.
The enforceability of restrictive covenants is usually highly dependent on the specific context of each case. Factors such as the employee’s role, behaviour during the notice period and reasons for absence can play pivotal roles in judicial decisions. Absence periods before termination can form part of this picture.
Conclusion
For HR professionals, the case serves as a reminder of the nuanced nature of restrictive covenants. Considering any absence periods before termination may make any decisions less open to a successful challenge.
If an employee has been on extended sickness absence before termination, it may be difficult to enforce the entirety of a restrictive covenant. Employers should seek independent professional legal advice at the earliest opportunity. The Employment Lawyer’s Association has a handy ‘find a lawyer’ tool, if you do not already have access to a specialist.
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