Deal or no deal: post termination non-solicitation clauses after Towry

By Guildhall Chambers - 25 June 2012

Julian Allsop, Guildhall Chambers

Post termination non-solicitation restrictions frequently appear in contracts of employment. However, employers should be aware that the protection that they afford can be inadequate, particularly where the client may view their close relationship as being with the employee, rather than the employer, as it is necessary in each case to prove that solicitation of the client has taken place. The gap can be filled by the imposition of a non-dealing clause, which eliminates the requirement to prove whether the former employee has initiated contact with the client and whether in the circumstances, such contact amounted to solicitation. This distinction was highlighted in the recent judgment in Towry EJ Ltd v Bennett and others [2012] EWHC 224 (QB).

In October 2009, Edward Jones Limited was acquired by the Towry Law Group and its name was changed to Towry EJ Limited. Its business was the provision of financial advice to investors and as part of its strategy the financial advisers were encouraged to develop personal relationships with their clients by networking in the local community. At the time, the contracts of employment germane to the financial advisers who would become defendants in this litigation contained a fairly standard post termination restrictive covenant that prohibited the direct or indirect solicitation of any business, orders or custom from Towry's existing clients for a period of 12 months.

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