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Case Note: FW Farnsworth v Lacey

Monday, 17 December 2012

Employers often include restrictive covenants in employment contacts to protect confidential information that relates to their business. The case of FW Farnsworth and another v Lacey and others [2012] concerned the operation of restrictive covenants in an employment contract that had not been signed by the employee.

In FW Farnsworth v Lacey the court had to decide whether or not the restrictive covenants were in fact enforceable by virtue of the employee’s actions in the absence of a signed contract.

FW Farnsworth v Lacey Facts

The defendant, Mr Lacey, had joined the claimant’s business as a graduate in 2000. In 2003 he signed a contract in relation to his employment which did not contain any post-termination restrictive covenants. By 2009, he had been promoted to the position of site technical manager, a senior management position. He was belatedly sent a new employment contract in September 2009, six months after he had been officially appointed to the position in April. The new employment contract did contain post-termination restrictive covenants.

Mr Lacey briefly reviewed the new employment contract but did not sign it. In addition to the restrictive covenants, the new contract contained extra employment benefits such as a pension plan and private medical insurance. In 2010 Mr Lacey applied for cover under the private medical insurance scheme for himself and his family.

In 2012 Mr Lacey left his employer to work for a competitor company and the claimants brought proceedings alleging misuse of confidential information and seeking to enforce the post-termination restrictive covenants.

FW Farnswroth v Lacey Decision

The claimants sought an interim injunction to enforce restrictive covenants which prevented Mr Lacey from working for a competitor or soliciting their customers for six months after leaving. The company argued that Mr Lacey’s receipt of benefits under the contract implied his acceptance of the post-termination restrictive covenants.

The High Court awarded the injunction. It held that although Mr Lacey did not intend to accept the terms of the new contract his actions meant that he had in fact accepted it. Mr Lacey’s acceptance of the pension scheme did not imply acceptance of the contract because it was compulsory for senior management but his application for the private medical insurance did imply acceptance.

In making its decision, the court considered that a promotion of this nature materially changes the employment relationship and that is change is ultimately defined by a contract.

Conclusion

Although the terms of a contract may be implied by the conduct of the parties, it is always better to ensure employment contracts are properly concluded and signed by the employee.

If you would like more information regarding this case or any other Employment matters, Rollingsons has experienced lawyers who can advise you. Please contact Aneil Balgobin via e-mail ABalgobin@rollingsons.co.uk or by telephone on 0207 611 4848.

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