High Court Deliberates on Enforceability of Post-Termination Restrictions in Music Industry Employment Contract

Citation: [2024] EWHC 562 (KB)
Judgment on

Introduction

In the case of X-R Touring LLP v Joshua Javor & Anor [2024] EWHC 562 (KB), the High Court of Justice of the King’s Bench Division deliberates on a dispute involving post-termination restrictive covenants in the context of an employment contract in the music industry. The case juxtaposes the enforcement of non-solicitation covenants against the backdrop of an employment relationship and the implications on post-termination activities.

Key Facts

X-R Touring LLP (X-R), a music industry concert booking agency, brought claims against its former employee, Mr. Javor, and his new employer, WME, based on alleged breaches of post-termination restrictions specified in Mr. Javor’s employment contract. The primary concerns were:

  • Enforcement of a non-solicitation covenant intended to protect X-R’s business connections, and X-R’s claim for commission on bookings generated during Mr. Javor’s employment but realized after his departure.
  • Mr. Javor’s job switch coincided with a chain of high-profile concert bookings and timely press announcements, raising concerns over solicitation of X-R’s clients.

The court scrutinized several critical legal principles that play a pivotal role in such cases:

Restraint of Trade Doctrine

The doctrine helps determine the enforceability of post-termination clauses in employment contracts by ensuring they do not unreasonably prohibit an individual from earning a living. The contentious provisions in this case include non-solicitation and commission clauses, wherein the former is subject to heightened scrutiny to determine whether it extends beyond what is necessary to protect legitimate business interests.

Solicitation and Inducing Breach of Contract

The analysis pivots on whether acts constitute “solicitation” of clients and whether a new employer could be found liable for inducing breach of a non-solicitation covenant. The judgment references Towry EJ Limited v Bennett and other authorities to clarify the nuances of direct versus indirect solicitation, as well as the requirement of a material element of persuasion.

Enforceability of Commission Provisions

The controversial “commission provision” demands that the former employee account for commissions from post-employment bookings discussed during tenure, a scenario assessed under the restraint of trade framework. The case of Stenhouse Australia Ltd v Phillips becomes a guiding precedent for assessing enforcement through financial disincentives and indirect restraints on trade.

Severability and Reasonableness

The possibility of severing parts of a contractual clause to preserve its validity is examined, consistent with the principles laid down in Egon Zehnder Ltd v Tillman. The court must discern between what is contractually excessive and what stands as necessary protection for legitimate business interests.

Outcomes

The High Court renders a bifurcated judgment:

  • Non-Solicitation Covenant: The claim that the non-solicitation covenant was breached—and that WME induced such a breach—is upheld as fit for trial. The covenant’s enforceability and the defendants’ conduct in potentially breaching it warrant a detailed examination at trial.

  • Commission Provision: The claim regarding the commission provision is struck out. The court concludes that the provision is unenforceable, constituting an unreasonable and excessively broad post-termination restraint.

Conclusion

The judgment in X-R Touring LLP v Joshua Javor & Anor presents a nuanced examination of contractual post-termination restrictions within the context of employment law. It delineates the line between legitimate protection of business interests and undue restriction on an individual’s capacity to engage in his profession post-termination. The bifurcated approach in the outcome reinforces the notion that not all post-termination provisions are inherently enforceable, and each must be critically assessed for its justifiability and scope within the restraint of trade doctrine.