An independent school recently lost its bid to enforce a restraint of trade over its former Head Master.
The College sought an order interdicting its former employee from taking up employment with another independent school.
The former employee had commenced employment with the College as its headmaster in 2010. In 2017 he was promoted to managing director. He subsequently resigned in 2021 and announced that he was taking early retirement and was effectively retired for over a year. However, in 2022 the second independent school announced that he had been appointed as the head of its primary school.
Shortly thereafter, the former employee received correspondence on behalf of the College contending that he was in breach of the ‘Confidentiality and Restraint Undertakings’ contained in a Mutual Separation Agreement. The Mutual Separation Agreement provided that the former employee would not be employed by any company which renders ‘competing services’ within a radius of 50km for a period of two years.
In terms of the Agreement, the College was obliged to purchase the former employee’s shares in the school. The Court indicated that the agreement was poorly drafted and appeared to be the product of a ‘cut and paste exercise’ which rendered it impossible to determine the meaning of some of the contractual clauses. Furthermore, the College had cancelled its purchase of the former employee’s shares. The Court therefore held that it did not follow that the school be entitled to enforce the restraint clause as these were reciprocal obligations.
Ultimately, the flaw in the College’s argument was its failure to fulfil the basic requirements necessary to enforce a restraint of trade, namely a ‘protectable interest’. In terms of the law, a restraint clause is against public policy and unenforceable if its sole aim is to stifle competition.
In deciding whether a restraint of trade is contrary to public policy, there are two principal considerations: firstly, agreements freely concluded should be honoured; secondly, each person should be free to enter into business, a profession or trade in the manner they deem fit.
The fact that a former employee may be experienced and competent does not justify restraining them from changing their employment. Public policy demands that businesses be allowed to compete, and individuals to work and ply their trade freely. This is why the law requires a protectable interest for a restraint clause to be enforceable.
A restraint of trade is intended to protect the employer’s confidential information from falling into the hands of a competitor. The Court found that there was no evidence to suggest that the College curriculum was confidential, or that the identity of its customers and suppliers was confidential. To the contrary, the College offers the curriculum set by the Independent Examinations Board (IEB), as do many independent schools.
The judgment establishes that an independent school is not entitled to enforce a restraint of trade agreement to prevent an employee from moving to a competing school, if its sole purpose is to retain a popular or particularly competent teacher or headmaster, or to prevent a competitor from acquiring the services of such an individual.