The Court of Appeal, Lagos Division, has ruled that employers cannot enforce unreasonable post-employment restrictive clauses that prevent former employees from securing new jobs, reaffirming the constitutional right of Nigerians to earn a living.
In a unanimous judgment delivered by Justice Danlami Zama Senchi in Appeal No. CA/LAG/CV/319/2021, the appellate court dismissed an appeal filed by MTN Nigeria Communications Limited and upheld the decision of the National Industrial Court awarding ₦5.1 million in compensation to the company’s former Procurement Manager, Mr. Theodore Nwabueze Ikpa.
The Court of Appeal affirmed the June 13, 2018 judgment delivered by Justice A. N. Ubaka of the National Industrial Court, which held that the four-year post-employment restraint clause contained in Ikpa’s employment contract was unreasonable and unlawfully restricted his ability to secure alternative employment.
The case arose from the termination of Ikpa’s appointment as Procurement Manager in December 2008.
Through his counsel, Adetunji Adedoyin-Adeniyi, Ikpa challenged his dismissal, arguing that MTN failed to provide the mandatory one month’s notice or salary in lieu of notice as stipulated in his employment contract.
He also contended that the restrictive covenant imposed by the company effectively prevented him from obtaining another job until he reached retirement age.
Before the National Industrial Court, Ikpa sought several reliefs, including declarations that his dismissal was unlawful, payment of salaries up to his retirement date in October 2010, payment of retirement benefits, or alternatively, ₦10 million in damages for the restraint of trade clause.
Although the trial court dismissed most of his claims, it ruled that the four-year restriction was unreasonable and awarded him ₦5,101,674 as compensation, along with ₦100,000 in legal costs.
Dissatisfied with the ruling, MTN, through its counsel Solomon Mbadiwe, appealed the judgment, arguing that the National Industrial Court lacked jurisdiction to entertain Ikpa’s alternative claim.
The telecommunications company maintained that the restrictive covenant was lawful because it was intended to protect confidential business information, trade secrets and other legitimate commercial interests.
MTN further argued that Ikpa willingly accepted the terms of his employment contract, failed to prove he suffered actual financial loss, and that the compensation awarded by the trial court was excessive.
The company also insisted there was no evidence that it directly prevented Ikpa from obtaining another job after leaving its employment.
In response, Ikpa argued that the restrictive covenant effectively excluded him from the labour market for four years.
He presented evidence that prospective employers became reluctant to hire him after learning of the restraint clause, partly because MTN had previously taken legal action against former employees over similar contractual provisions.
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Delivering the lead judgment, Justice Senchi resolved all four issues raised in the appeal against MTN, holding that the National Industrial Court properly exercised its jurisdiction and correctly evaluated the evidence before it.
The appellate court accepted Ikpa’s testimony that he was unable to secure employment during the restraint period because prospective employers feared potential litigation arising from the restrictive covenant.
The judgment reinforces the long-established legal principle that while employers may protect legitimate business interests, post-employment restrictive covenants must be reasonable in scope, duration and application. Any clause that unfairly prevents a former employee from pursuing lawful employment or earning a livelihood is unlikely to be enforceable under Nigerian law.
The ruling is expected to serve as an important reference in future employment disputes involving non-compete clauses and restraint-of-trade agreements, particularly where such provisions place disproportionate restrictions on former employees.