The High Court upholds the importance of client and agency relationships

In a recent case in the education sector, the High Court found that the fragile relationship between an employment consultancy and its school clients made it more rather than less necessary to protect with restrictive covenants. Equally it held that the availability of recruitment information on social media does not prevent a consultancy from establishing an interest to protect.

The protection of relationships and the use of restrictive covenants with ex-employees can be a minefield.  This case, between 4myschools and an ex-employee, throws some light onto when restrictive covenants are reasonable and enforceable.

4myschools, the consultancy, employed Ms Palmer as a recruitment consultant matching teacher candidates with schools in Essex. Her contract of employment contained covenants preventing her from soliciting or dealing with candidate teachers and schools she had dealt with in the 12 months prior to her termination of employment, for a period of 6 months after termination.

In 2013, she resigned and took up a job with another education recruitment consultancy, Sugarman Education. 4myschools believed that she was in breach of her restrictive covenants and issued a claim in the High Court for compensation for the breach.

The court had to decide whether 4myschools had a legitimate proprietary business interest to protect and, if so, whether the restrictive covenants in Ms Palmer’s contract of employment were reasonable. If 4myschools were to fail either of these tests, then they would not be able to enforce the restrictions.

In deciding whether there was a legitimate proprietary business interest to protect, the court considered:

• whether schools or teachers have any loyalty to any particular agency
• whether that loyalty is to a particular agency rather than to a particular employee of the agency
• the evidence that teachers register with several employment agencies at the same time and schools deal with a number of employment agencies
• the use of the internet and social media, as a result of which relevant information is in the public domain rather than confidential to a particular recruitment agency
• the suggestion that schools will deal with whichever agency can satisfy their requirements straightaway.

Despite these factors, the court concluded that it is an asset for a recruitment consultancy such as 4myschools to be a client’s first choice and that the relationship between the particular consultant and the school/teacher might be a deciding factor. Ms Palmer had established relationships with schools and teachers because she was the person who visited the schools and spoke to them on behalf of 4myschools. As a result of those relationships, she was able to influence schools and teachers to use her new employer, Sugarman Education.

The court took into account the factors set out above, not as supporting the lack of a proprietary interest but as indicating that the relationship between schools, teachers and 4myschools was fragile. The court said it makes the prospect of a successful solicitation by the ex-employee more likely.

The court went on to rule that the 12 month and 6 month timescales set out in the restrictive covenants were reasonable.