Employment and Industrial Relations Law

Limitations to Restrictive Covenants in Maltese Employment Law

14 Jul 2022

3 min read

In ‘Cutrico Services Ltd v. Josef Penza’, decided on the 4th of May 2022 by the Court of Appeal, the Maltese courts confirmed the pertinence of restrictive covenant clauses in Maltese Employment Law.

The Court in this case reiterated that a clause within an employment contract, which manifestly restricts the right to solicit or entice an employee to leave the original employer`s employment, to instead work for another employer, is impermissible.

In the current case, Josef Penza, as defendant, was employed by Cutrico Services Ltd, from 2001 until June 2013, and his contract incorporated a non-compete clause, and stated as follows;

“The employee shall not, during the continuance of this agreement, or for a period of two years after the termination of his employment… either on his own account, or for any other person, firm or company, solicit or interfere with or endeavour to entice away from the Company, any person, firm or Company who at any time during the period of two years immediately preceding the date of termination of his employment, were customers or in the habit of dealing with the Company. Should the employee be in breach of this clause, he shall be liable to a penalty…”

It resulted that Penza took on an urgent task for a certain Keith Busuttil one year after his termination of employment with the plaintiff party. Busuttil was a direct client of the plaintiffs.

It is to be noted that the above clause did NOT specify the direct relationship requirement between the employer and third party. Therefore, since it did not specifically cater for clients belonging to the plaintiff company, it was declared null by the First Hall Civil Court.

The appellate Court went on to confirm that these clauses are accepted in the Maltese legislative system, so long that they are reasonable, meaning limited to that which is strictly necessary to protect the principal’s interests. However, the Court went on to say that the clause in question would ONLY be null with respect to those customers whom the ex-employee would not have had dealings with during his employment.

Interestingly, the Court determined that the period of two years following the termination was reasonable and that finally the plaintiff company did not suffer from any damages from the acts done by the defendant party. For this reason, Penza’s violation of the clause was too insignificant to enforce the penalty expressed within the restrictive covenant clause.


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