Software company enforces restrictive covenant on salesman

A court has ruled that a restrictive covenant involving a software company and a former employee was reasonable and so therefore enforceable.

The company produced software for the fresh produce industry. They licensed their products for 12-month periods and renewed the licence upon payment of an annual fee.

The sales manager had a post-termination restrictive covenant in his contract that said he couldn’t engage in any business with a similar company within a 12-month period of leaving.

The salesman resigned when he was offered a job with a company that produced similar software. His former employer applied for an injunction to prevent him from working for the new company for 12 months.

The salesman said that he had rarely consulted the company’s database and that he was unable to copy the information. However, the court was unconvinced and said that the salesman could have memorised a lot of important information.

The court ruled that the covenant was reasonable and necessary to protect the company’s legitimate business interests.

If the two companies competed for a new client, the salesman could use prohibited information to make a sale for his new employer at the expense of his former employer.

The court also ruled that a 12-month period was not unreasonable as the licenses were renewed on an annual basis.

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