Bosses, check your contracts with employees restricting them from working in Bermuda if they leave the business. The contracts may not be enforceable, and some may even be illegal under the Human Rights Act.

In a precedent setting judgment this week on a dispute between two hairdressers and their former employer, Supreme Court Puisne Judge Vincent Meerabux has ruled such contracts are an unreasonable restraint of trade because of Bermuda's small size.

Lawyer Richard Hector, who was representing hairdressers Christine Ness and Doreen Koban against a claim of damages by their former employer Joan Reiter, said such contracts are commonly used in Bermuda as a means of keeping employees from leaving a business.

"The decision is important because it finally gives some guidance to employers and employees about such contracts,'' he said. "Such clauses are often held over people's heads as a threat to keep them from leaving the employer.'' Mr. Justice Meerabux, in dismissing Mrs. Reiter's suit after a four-day hearing earlier this month, decided that the clauses in contracts she had made Ms Ness and Ms Koban sign were too restrictive in making them agree not to work as hairdressers "at any place in the Islands of Bermuda'' for one year after they left Mayfair Beauty Salon.

"The contracts have imposed an area that is too wide and hence I think require exceptional justification,'' Mr. Justice Meerabux stated in his judgment. ".. .I think the fact customers in Bermuda come from all over the Island is not exceptional justification. In the circumstances I am of the view that this part of the covenant is invalid.'' He also decided that the contract violated Bermuda's Human Rights Act as Ms Reiter had discriminated against Ms Ness and Ms Koban because she did not require her Bermudian employees to sign a similar contract.

Ms Ness and Ms Koban are both British citizens. Ms Ness had been employed at Mayfair for 15 years and Ms Koban for 19 years when they quit last year to purchase Images on Pitts Bay Road.

Mrs. Reiter then blamed them for stealing her clients and for the loss of her business, which closed this year after 44 years in operation. Mayfair was located on Church St. near the corner of Par-La-Ville Rd.

Mr. Justice Meerabux also found that the two hairdressers had not solicited clients away from Mrs. Reiter's business as they had only contacted them after they quit Mayfair.

Clauses restricting employees from competing or soliciting clients after they leave a business usually crop up in contracts between employer and employee in the hairdressing, legal, and accounting professions. Some executives and doctors may also have agreed to such clauses in contracts they signed.

Restraint of trade clauses have been upheld in the British courts only where they have been deemed not to have restricted someone from working outside of a limited geographical area, say ten miles from a former employer.

Mr. Hector said it remains to be seen whether contracts which restrict former employees from working within a certain area of Bermuda will be upheld by the courts in the future.