Kayode Ibukunoluwa-Micah's Blog

It is important to state here that many countries prohibit what can be termed as an act of unreasonable restraint and will only grant approval in limited circumstances to protect trade secrets or inventions.

In Aprofim Engineering Nigeria Limited v Bigouret & Anor (2015) and in the case of Andreas. I. Koumolis v Leventis Motors Limited (1973 SC 250/1971 the arguments had been made that restrictive covenants constitute an affront to section 17 (3) (a) and (e) of the 1999 Constitution (as amended) hence, any agreement that is considered as an excessive restraint or unreasonable in nature will not be entertained by the court.
It is therefore important that HR practitioners take note of the following when including a non-compete clause in a contract of employment or when drafting separate restrictive covenants.

1. Such agreement must not be overly broad otherwise it will be difficult to enforce. It must be specific and well defined. It must detail what is to be protected for which the company seeks employees restraint.

2. It should be time-bound. The period of restriction must be reasonable. Some jurisprudence will recommend between six months and one year and anytime beyond this will be view as unreasonable.

3. It must be location specific. Enforceability of restrictive covenant should be within a geographical space within which competition by an ex-employee or employment by a competitor can be said to be injurious to the trade interest of an employer. If it not, then such a restriction will remain unenforceable. The case Mesop Kholopiaan v. Metal Furniture Nigeria Limited, High Court of Lagos, Ikeja Judicial Division delivered on March 5, 1974, is instructive. The company had a non-compete clause which covered a radius of 800 miles from Ikeja and sought for a restraint which was eventually thrown out by the trial judge as unreasonable.

4. It must be industry specific. The intention of a well-drafted restrictive covenant or a non-compete clause is to ensure that information acquired by the staff which is not general knowledge but specific to the organization are not shared with a competitor or used directly by the employee in competition against the employers interest. Therefore, it suffices that when couching such a restrictive agreement that it is industry specific. For example, if a company operating in the hospitality industry, it will be unreasonable to ask for a restraint preventing the staff from taking up an appointment in the banking sector.

5. A non-compete agreement must give due consideration to the interest of the employee during the period of the restrictive agreement. It will amount to an act of wickedness if an ex-employee is asked not to take up employment when he or she is out of employment. In some instances, half the employees salary is paid during the whole length of such restraint.

6. It must be based on a valid contract of employment and legitimate business relationship. You cannot enforce an agreement that is not based on a legitimate business practice or an employment relationship that is outside the ambit of the law. See Illinois Official Report (Supreme Court), in a case involving Reliable Fire Equipment Company v. Arnold Arredondo, 2011 IL 111871. The judgment in, this case, held that Reliable does not have a legitimate business to justify a noncompetition Restrictive Covenant.

7. Lastly, such agreement must not be injurious to the public good. In case, where such acquired information will benefit the general public or nation restraining such an individual from practicing his or her trade elsewhere will likely be considered as unenforceable.

It is important to note that employment relationship or contract is a matter of law subject to legal interpretation; hence, a non-competition restrictive agreement must conform to the provision of the constitution and satisfy the laws or labour Acts to be enforceable.

Continue to: GARDEN LEAVE AND EMPLOYEES BENEFITS IN NONCOMPETITION RESTRICTIVE COVENANTS

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