Post termination restrictions - FW Farnsworth and another v Lacy and others [2012] EWHC 2830

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Post termination restrictions - FW Farnsworth and another v Lacy and others [2012] EWHC 2830

Should an employee be bound by restrictive covenants contained within a new contract which was provided to him after promotion that he had not signed or returned? In the case discussed below, the High Court considered whether an employee's conduct after he received his new contract meant he had impliedly accepted the new terms.

Background

Mr Lacy was employed by Northern Foods Limited and worked at FW Farnsworth Limited. Mr Lacy was initially employed in September 2000 and was subsequently promoted. In 2003 he signed his first contract of employment. The contract did not contain any post termination restrictive covenants ("PTRCs).

In April 2009 Mr Lacy was formally promoted to site technical manager having undertaken the position for several months previously. In September 2009 Mr Lacy was then sent a new contract which contained PTRCs. Mr Lacy did not sign or return the contract however he did briefly look at it and put it in his desk. It is pertinent to note that he did not raise any objections to his employer and he received benefits from his new contract which he had not previously been entitled to such as a pension plan and private medical insurance.

In March 2012 Mr Lacy resigned and wanted to move to a competitor of his employer. His employer brought proceedings in the High Court to enforce the PTRCs from his 2009 contract which had the effect of preventing Mr Lacy from working with a competitor for six months following the termination of his employment. An interim injunction was granted.

At the return hearing the employer argued that the contract was impliedly accepted by Mr Lacy joining the pension scheme and obtaining PMI family cover. On the contrary, Mr Lacy argued that because he had not signed the contract he could not be bound by the PTRCs.

Decision

In FW Farnsworth and another v Lacy and others [2012] EWHC 2830 the High Court held that an employee was bound by the terms of an unsigned version of a contract of employment. The court held that Mr Lacy was bound by the terms of the 2009 contract from the date he applied for the PMI cover. However, Mr Lacy's move to the defined contribution pension scheme did not mean that he has impliedly accepted the contract. This is because he was required to do so as a result of the final salary pension scheme closing. If Mr Lacy had not applied for the PMI it appears that the court may not have found that he was bound by the PTRCs. As Mr Lacy only applied for the PMI one year after he received the new contract, his employer potentially had no protection during that period of time.

This case as well as many recent cases has highlighted the importance of employers:

  1. Issuing new contracts with each promotion; and
  2. Ensuring that employees sign and return contracts.

The enforceability of the PTRCs was not at issue in this case.

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