Such non-compete clauses are part of a range of protective clauses – known as restrictive covenants – which an employer may seek to impose on an employee in order to protect its business after the employment relationship comes to an end. Restrictive covenants can also restrain the ex-employee from soliciting or dealing with the employer’s customers, or attempting to entice other employees away from the business. Restrictive covenants are also utilised in other commercial contexts, such as joint venture and collaboration agreements between businesses, and in shareholder agreements.
In this example, a non-compete clause might prevent Clarkson and/or the other presenters from setting up in competition with Top Gear within a certain geographical area for a prescribed period of time. A 12-month timeframe has been rumoured, and could well be global in its geographical reach given that Top Gear is currently watched in more than 200 countries. What precisely would be considered to fall within the scope of acting “in competition” would of course depend upon the facts, but offering curmudgeonly views on motoring-related issues on a TV programme would almost certainly meet that criterion.
Because restrictive covenants restrain an individual’s ability to go out into the marketplace and earn a living the Courts have traditionally given close scrutiny to such clauses. They are likely to be upheld only if they are limited to what is necessary to protect the employer’s ‘legitimate business interests’. The Courts have generally adopted a less strict approach to upholding such clauses where they are in a business-to-business, rather than employer-employee, context – the public policy rationale being that there is a far greater equality of bargaining power between companies than when an individual is being employed. In any event, given that Top Gear generates around £50m a year for BBC Worldwide, taking appropriate steps to protect that crucial revenue stream by seeking to impose such a non-compete clause would be reasonable at least in principle.
One of the main battlegrounds when challenging the validity of restrictive covenants has been the length of time for which the employer has sought to impose the restriction. At the risk of giving a typical lawyer’s answer, how long will be considered reasonable – and thus enforceable – will depend on the specific facts of each case. But by way of example, a six month non-compete clause was held to be invalid because it prevented the employee from having any interest in a competitor, and there were no comparable restrictions on more senior employees. Conversely, other recent cases have upheld a 12 month non-compete clause against a financial adviser, and a 3 year non-compete clause in a share sale agreement against a seller’s civil partner. In these two cases, it was relevant that the covenanting parties had received payment under commercial agreements which sold the goodwill in the client base to the employer/purchaser.
Given the large sums of money involved in the Top Gear franchise, one would expect the relevant non-compete clauses to have been carefully drafted and negotiated by the legal teams for both the BBC and the presenters at the outset. Whilst the exact details of the clauses(s) have not been publically disclosed, it would seem highly probable that the clauses would be upheld as being valid and enforceable in the unlikely event that they were breached or challenged.
Businesses should be alive to the potentially serious damage that can be caused by ex-employees or other third parties and should obtain specialist legal advice to ensure that those interests are robustly protected from the outset and then kept under review. Those who fail to do so risk being overtaken by competitors, or even breaking down completely.
If you wish to discuss any of the issues outlined in this article, including how our Commercial Disputes team can help your business protect its commercial interests, please call 01603 598000 or email firstname.lastname@example.org and a member of the team will contact you.