A recent decisions in the High Court provide a reminder of the legal principles concerning reasonableness of covenants only this time in a well trodden path of a recruitment business.
Ms Palmer (the first defendant) worked for a recruitment agency (“4myschools”) which matched teachers to schools in Essex. Her contract of employment contained covenants not to solicit or to deal for a period of 6 months after the ending of her employment with the candidate teachers or client schools with whom she had dealt in her last 12 months. Those covenants were expressed to extend to actions carried out by her, not merely on her own account, but also “as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever”.
Ms Palmer got a new job with another teacher recruitment agency in London (Sugarman Education, the second Defendant). Sugarman Education wished to develop its business in Essex and so assigned Ms Palmer to work on building their business with secondary schools in the same area that she had covered for 4myschools.
4myschools received information which led it to believe that Ms Palmer was breaking the terms of her restrictive covenants after she signed undertakings and it then decided to bring High Court proceedings against both Ms Palmer and Sugerman Education.
Were the restrictive covenants enforceable?
At a final trial (rather than at an interim stage) the court had to decide (amongst other things) whether the restrictive covenants were legally enforceable.
The first issue was whether 4myschools had a relevant proprietary interest which the covenants were designed to protect. Part of Ms Palmer’s defence was that with the increasing use of the internet and social media, relevant information was in the public domain and so could not be considered confidential to any particular agency.
The evidence was that in the market in this sector, much of the relevant information about teachers and schools was publicly available and schools generally used whichever agency could get them the best candidate at the right price when they need them. Candidates would usually sign up with multiple agencies and took the best offers that come in from time to time. Therefore, there was little loyalty owed either by schools or teachers to any particular consultant or to any particular agency.
The High Court decided that 4myschools did have a sufficient proprietary interest that it was entitled to seek to protect in the connections which Ms Palmer would be likely to make while employed by 4myschools because:
- Ms Palmer was the name and (to a lesser extent) the face which represented 4myschools to its Essex secondary school clients and candidates and so the building up of relationships with schools and teachers was an integral part of the role envisaged for her;
- although schools would ultimately use whichever agency has the right applicant, they had a choice about which agency to register with and to contact first and among those otherwise equal agencies, the relationship between the consultant and the manager might sometimes be the deciding factor;
- Ms Palmer would, when she left, have taken with her in her head at least some valuable information confidential to 4myschools. Although identities, addresses, phone numbers and qualifications may all have been publicly available, Ms Palmer would have acquired other valuable information about schools and candidates in the course of her employment that was not publicly available.