Employment Law Update – Restrictive Covenants / Employment Status / Shared Parental Leave

Employment Law Update – Restrictive Covenants / Employment Status / Shared Parental Leave

Enforcing Restrictive Covenants:

Re-use Collections Limited v Sendall & May Glass Recycling Ltd [2014] EWHC 3852

The Facts

Mr Sendall had worked for his family business since 1980 and did not have a contract of employment. The business was taken over by Re-use Collections Ltd and in 2013 Mr Sendall reluctantly signed an employment contract which included specific post-termination restrictions including 6 month non-solicitation and non-dealing clauses, and a 12 month non-competition clause. Shortly after, he left to join a competing business.

The Issue

When Re-use Collections Ltd tried to enforce the covenants, claiming that Mr Sendall had been approaching their customers and that his employment with a competitor was in breach of his restrictions, the court had to consider whether Mr Sendall had received adequate consideration for agreeing to sign the new contract which contained the restrictions. Under contract law, he needed to receive “some real monetary or other benefit” in order for the new contract – and the new restrictions – to be binding.

The Decision – a lesson for Employers

The court refused to enforce the restrictive covenants on the basis that Mr Sendall had not received any benefit for signing up to the new contract. Despite Re-use Collections Ltd’s suggestion that his ongoing employment was sufficient benefit, there had been no suggestion he would have been dismissed if he refused to sign up and so the court rejected this argument.

The decision is a useful reminder that the onus is firmly on the employer to show that restrictive covenants are reasonable and employers must be particularly careful when trying to introduce covenants part way through employment.

Determination of Employment Status:

Pimlico Plumbers Ltd v Smith [2014] UKEAT/0495/12/DM

The Employment Appeal Tribunal (“EAT”) has given further guidance about factors which may be relevant to determining employment status. It will always be a matter of considering the factual background in each case.

The Judgment

In this case, the Claimant wore a Pimlico Plumbers uniform and drove a company branded van. He was paid after submitting invoices and dealt with his own tax. He was required to provide his own tools, equipment and materials and maintained his own insurance. He could choose particular working hours and could reject particular jobs and Pimlico Plumbers was under no obligation to provide work if none was available.

However, the EAT maintained that he was a worker because there was an expectation that the Claimant would provide services personally and he was not entitled to send a substitute to carry out work for him.

Legislation Update

The Shared Parental Leave Regulations came into force on 1 December 2014, introducing a new system of shared parental leave which can be taken in respect of children whose expected week of childbirth (EWC) begins on or after 5 April 2015. We are already seeing some businesses introduce policies to deal with shared parental leave. Do you need advice to manage the new system? Please contact our Employment Team who would be happy to help.