The court reassures recruitment agencies: restrictive covenants are a serious undertaking
Research shows that the average worker in the UK changes jobs every 5 years. In the fast-paced world of recruitment it is often more frequent. It is therefore particularly important for recruitment agencies to ensure that contractual terms prohibit departing employees from diverting key assets such as clients, candidates and staff to competitor businesses or new start-ups. This can be achieved through carefully drafted restrictive covenants.
The legal principles governing restrictive covenants can be a minefield. Get it wrong and the clauses can be deemed unenforceable. However, the recent case of Mandeville Retail Ltd v Gerstein [2025] 10 WLUK 164 reassures recruitment agencies of the value of getting these clauses right. In this article we examine the practical outputs of the case, as well as the key principles governing restrictive covenants.
Mandeville: a case study with relevant consequences
The case of Mandeville concerned two former employees of a recruitment agency who left their employment to set up a competing business. In doing so, they acted in breach of non-solicitation and non-dealing covenants in their employment contracts. Their restrictive covenants prohibited each of the employees from working with the agency’s current or prospective clients and clients with whom the employees had had material dealings with in the 12 months prior to their termination.
The agency issued an application for an urgent interim injunction to restrain the employees’ conduct. An order was made which required the employees to undertake to the court that they would not solicit or have dealings with the agencies’ clients until July 2025 and specifically named three clients, including company X.
An undertaking in the recruitment context is a contractual promise to abide by post-termination restrictive covenants for a specified period. They may often be agreed between parties pre-action to prevent the need for expensive injunction action where a breach of restrictive covenants is alleged.
In May 2025, the agency discovered that the former employees were working with company X. The agency therefore issued a further application for breach of the undertakings and contempt of court.
The employees argued that the undertakings did not apply to work which they had already started doing for company X. They argued that they were only prohibited from doing any new work with company X and that if there was any ambiguity, the undertakings should be interpreted in their favour.
The court did not accept the former employees’ position. The undertakings that they gave were not ambiguous and did not include any carve-out for pre-existing work. The breach was therefore deemed to be deliberate, intentional and substantive.
Demonstrating how seriously the courts take such breaches, the court gave real consideration as to whether it was appropriate to impose a prison sentence on the employees. This is because a breach of an undertaking to court amounts to a contempt of court and can lead to serious consequences including fines, property seizure and imprisonment.
Although the court was unimpressed by the former employees’ conduct, in the circumstances, it decided not to order imprisonment, instead ordering the employees to pay a significant fine of £20,000. The value of the fine reflected that the breach had been limited to company X and the contractual undertakings had since expired, but that the harm to the agency could not be remedied.
This case highlights the seriousness of breaching undertakings given to court in the context of post-termination restrictive covenants.
The value of restrictive covenants
Client lists, candidate databases, know-how and financial information are all significant business assets that are critical to the success of a business. This is especially true for those in the recruitment industry. This is why it is important that businesses protect themselves by having carefully drafted restrictive covenants in their employment contracts and confidentiality clauses to guard against the misuse of confidential information. When an employee leaves an agency, restrictive covenants can help to deter that employee from taking business’ valuable assets to a competitor and offer a route to enforcement if that worst case risk materialises.
A restrictive covenant is a clause which seeks to restrict a former employee’s actions after their employment contract terminates. This can dictate what the former employee can do for work and where they can work (‘non-compete’ clauses), who they can employ (‘non-poaching’ clauses), what information they can take with them when they leave (confidentiality clauses) and who they can speak to or deal with when generating work for a competing business (‘non-solicitation’ and ‘non-dealing’ clauses).
Given these tight controls, as a starting point, restrictive covenants are therefore generally void for being in restraint of trade and contrary to public policy, unless an employer can convince a court that that there is a legitimate business interest that is being protected and that the clauses go no further than necessary to protect that interest. The drafting of restrictive covenants is therefore critical to the clause’s success. A fine balance must be struck between protecting the employer while not imposing too wide a restraint on an employee’s ability to work.
The future for restrictive covenants
The government is presently considering different ways to reform non-compete covenants in employment contracts as part of its growth mission to deliver higher living standards. This includes through creating stable employment and a thriving business environment.
On 26 November 2025, the government published a working paper encouraging individuals and organisations alike to provide their views on various options of reforming the law around post-termination non-complete clauses: https://www.gov.uk/government/publications/reform-of-non-compete-clauses-in-employment-contracts-working-paper/working-paper-on-options-for-reform-of-non-compete-clauses-in-employment-contracts.
According to the working paper, analysis suggest that around 5 million workers in Great Britain are working under a contract that contains a non-compete clause with a typical duration of six months. Research from the Competition and Markets Authority (CMA) shows that non-compete clauses are not just common in contracts of high earners, but also among lower-paid jobs, with between 20% to 30% of workers in lower-paid jobs believing themselves to be subject to non-compete clauses.
The working paper proposed several options for reform, including:
- a complete ban on non-compete clauses;
- a ban below a certain salary band;
- a statutory limit on the duration of the non-compete clause, either universally or based on the company size; and
- a combination of a ban below a certain salary band and a statutory limit of three months for those earning above a certain salary band.
Several organisations have responded to the government’s working paper. CMA published its response on 25 February 2026: https://www.gov.uk/government/publications/cma-response-to-working-paper-on-options-for-reform-of-non-compete-clauses-in-employment-contracts. Its view is that a ‘combined’ approach should be taken involving a total ban on non-competes for roles below a certain salary band and restricting the duration of non-competes above that salary band.
The subject continues to be a hot topic, and we look forward to seeing how the government proceeds with its plans for reform.
The law on restrictive covenants is always changing in terms of what is acceptable and enforceable and what is not. This is why it is important for businesses to review their covenants every few years to make sure that they are in line with the law.
We deal with these issues very regularly and for more information, please contact:
Jonny Scholes
Partner - Litigation, Mediation & ADR
T: +44 (0) 782 443 5665 jonny.scholes @pannonecorporate.com
Sarah Bazaraa
Partner - Litigation, Mediation & ADR
T: +44 (0) 792 023 7599 sarah.bazaraa @pannonecorporate.com
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