Search

How can we help?

Icon

Restrictive covenants – employers watch out

Employers can be liable for inducing a breach of a restrictive covenant, but relying on legal advice can provide a defence as held the Court of Appeal in Allen v Dodd & Co Ltd.

Prior to employing Mr Pollock, Dodd and Co sought legal advice on his current employment contract with David Allen Chartered Accountants (‘Allen’), in particular his post-termination restrictions. The legal advice was that it was “more probable than not” that the restrictions would be unenforceable. Relying on this advice, Dodd and Co hired Mr Pollock.

Allen subsequently sought to enforce the post-termination restrictions in the High Court, which, after severing some words, held that the restrictions were enforceable against Mr Pollock. As part of their deliberations, the High Court considered whether Dodd and Co were liable for inducing the breach by Mr Pollock. It was held that they were not liable as “they did not turn a blind eye to the employee’s contractual obligations”. This was evidenced by the fact they had obtained legal advice.

Employers can be liable for inducing a breach of a restrictive covenant.

On appeal, Allen’s case was dismissed again. The Court of Appeal held that where “the defendant honestly believes that the act that he procures will not amount to a breach of contract, he is not liable”.  As Dodd and Co had relied honestly on their legal advice and that the advice did not definitively conclude that there would be a breach, they were not liable.

This is a very useful reminder that employers can be liable for inducing a breach of contract. Employers should take legal advice as early as possible in order to understand the risks of that accompany post-termination restrictions; this will help therefore mitigate any risk of inducement.

For more information on restrictive covenants, get in touch with our Employment department.

About this article

Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

About this article

Read, listen and watch our latest insights

art
  • 04 July 2025
  • Employment

Update: The ‘Employment Rights Bill Implementation Roadmap’

The Employment Rights Bill is a draft law which is poised to expand the rights of employees, signifying a major overhaul in employment law. The ERB has already been passed by the House of Commons and is currently at the ‘Report Stage’ in the House of Lords.

Pub
  • 03 July 2025
  • Corporate and M&A

Get your tech business market ready for sale

In our latest podcast, join Stuart Mullins and Nicky Goringe Larkin to learn how to maximise your tech business value and get your tech business market ready for sale.

art
  • 03 July 2025
  • Immigration

Major Changes to the Immigration Rules from 1 July 2025: What Employers and Visa Holders Need to Know

We outline the key updates, how they affect employers and visa holders—particularly those on the Skilled Worker and Global Business Mobility (GBM) routes—and how our team can assist you in staying compliant and ahead of policy changes.

art
  • 02 July 2025
  • Employment

Day One Rights: What the New UK Employment Bill Means for You and Your Workplace

Let’s unpack what’s changing in the UK Employments Rights Bill, and why it matters, and what both employees and employers should expect.

art
  • 01 July 2025
  • Privacy and Data Protection

Data protection compliance: tricky issues for employers

This article highlights key issues organisations may face when processing personal data and stresses the importance of a proactive approach. It also outlines tailored training packages to support compliance and build internal expertise.

art
  • 26 June 2025
  • Employment

A shift in EHRC guidance on single sex spaces in the workplace

In a recent significant shift, the Equality and Human Rights Commission (“the EHRC”) has quietly amended its guidance on single sex spaces in the workplace.