Probationary Period With Short Notice Risks Undermining Enforceability Of Non-Compete Restraints

Employers including restrictive covenants in precedent employment contracts may wish to review their applicability during any probationary period subject to short notice. The inclusion of a probationary period with short notice may undermine the enforceability of non-compete covenants applicable from the start of employment. This is worth bearing in mind if introducing or updating probationary periods in light of the changes to unfair dismissal law from 1 January 2027.

The High Court in Huws Gray Ltd v Daniel Gentleman held that a six month non-compete covenant was unreasonably wide in a number of respects (including that it prohibited roles very different from Mr Gentleman's core sales role for builders' merchant Huws Gray and sought to protect business in which he hadn’t been materially involved) and was unnecessary given that a properly drafted non-dealing provision would have been adequate on the facts.

The Court also considered that the employer had failed to establish that a six month restriction was reasonably necessary from the outset of employment, given the contract included a probationary period subject to one week's notice. The employer had sought to justify the covenant by reason of the need to protect customer connections and confidential information. However, the Court considered that Mr Gentleman could not have developed relationships with the 103 customers the employer was seeking to protect during the early weeks of probation, and equally the employer had failed to establish that his access to confidential information from the outset would justify the covenant, given the evidence did not demonstrate that he would remember it or that it retained commercial value for six months.

The reasoning follows that in the 2021 case of Quilter (see our blog post here) where the brevity of a two week notice requirement during probation was taken as indicating a low perceived need for protection - the shorter the notice period, the less important to the company the employee's services would appear to be and the more junior the role. It may be worth considering whether to provide for a shorter (or potentially no) restriction during the probationary period, to reflect how long it will take for an employee to build any protectable client connections or acquire access to confidential information. Of course, covenants should always be tailored to the specific role, and for some senior roles there may well be legitimate business interests to protect from day one.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.