The recent dispute before Mr Justice Senan Allen in the High Court between Ryanair DAC and their former Chief Operations Officer (COO), Mr. Peter Bellew, highlights the limitations of restrictive covenants in employment contracts.
A restrictive covenant can require a party to a contract to either take or abstain from a specific action. In the context of employment contracts, such a covenant can be included by an employer to seek to restrict an employee’s actions post-employment.
The dispute in this case arose when Mr Bellew resigned from his role as COO for Ryanair in July 2019 and secured a new position as COO for easyJet, a Ryanair competitor, with a planned start date for January 2020. The issue of contention between the parties was that Mr Bellew’s contract of employment included a covenant restricting his ability to take up employment with any European airline, in this case easyJet, for a period of 12 months. As a consequence, Ryanair sought an injunction to prevent Mr Bellew taking up his new position with easyJet.
In the High Court, Allen J refused Ryanair’s application for an injunction on the grounds that the restrictions imposed on Mr Bellew’s liberty to take up this new role, by virtue of the covenants included in his employment contract, went beyond what was justifiable and as such was void.
Ryanair have also been ordered to pay a portion of Mr Bellew’s legal costs.
When drafting restrictive covenants in employment contracts, it is important to ensure they:
- reflect the specific relationship between the employer and the employee
- reflect the nature of the particular business
- do not go further than is necessary
- the period of time is acceptable (the period of 12 months in this matter was not a contentious issue)
Employers must regularly review restrictive covenants to determine if changed circumstances affect their value, for example, if an employee’s role has changed since.
It is important to receive expert legal advice on all aspects of employment contracts and disputes.