Restrictive Covenant Contract

[TG1971]

[FONT='Verdana','sans-serif']Hi All,[/FONT]
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[FONT='Verdana','sans-serif']Please advise if you can.[/FONT]
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[FONT='Verdana','sans-serif']After a year of working for a company (a one man band, two if you include me), I was suddenly presented with an employment contract (which he had already signed) on a Friday evening as I was leaving for home. When I was at home I read it and saw a very extensive list of restrictive covenants (I was selling Microsoft ERP Software), basically, non dealing and non soliciting clauses for 6 months. On the Monday morning I was asked if I had the contract with me, which I did. I was then asked to sign it there and then and although I said I wanted to seek advice surrounding the restrictive covenants, I was told I had to sign it there and then or a) I wouldn't be going to the 'partner sales conference' in Germany later that day (which was important for my sales success within the company) and b) by not signing it it would be deemed as a dismissible offence.[/FONT]
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[FONT='Verdana','sans-serif']Yes, you guessed it, I signed the contract on the 3rd of October, having been presented with it the previous Friday (30th September). I was then told on the 20th October that I would be made redundant at the end of October.[/FONT]

At the end of November I found myself employment with a direct competitor and contacted my previous prospects who were looking to investigate ERP solutions (usually has a 6 month sales cycle) which until last week my ex employer hadn’t bothered to contact any of them until he found out I was working for a competitor.

It goes without saying I have received a letter from my ex employer stating the restrictive covenants and his options.

Where do I stand on this?

Thanks in advance.[FONT='Verdana','sans-serif'][/FONT]

 

[internetspaceships]

They are an absolute nightmare to enforce.

I'm also not sure of the ramifications of the fact that he made you redundant within a short space of time of signing it.

 

[bwglaw]

Restrictive covenants can be complex and your options will largely depend on the construction of the covenants. The contract needs to be examined before providing any advice as to your options. On any forum you may well receive conflicting or incorrect advice because no-one has had the opportunity to examine the contract itself and we are only reliant on the facts given by yourself.

 

[TotallySport]

can we ask what his options were?

 

[internetspaceships]

We should all take note of that and then nobody would ever offer advice because right now, most of the time we have multi page threads based upon very little real info wouldn't you agree?

 

[TotallySport]

can we also ask have you told your current employer? and is your old employer financially strapped for cash?

 

[bwglaw]

can we ask what his options were?

I would not want to venture into the technicalities of restrictive covenants, however, an assessment needs to be made as to whether the restrictive covenant is indeed enforcible taking into account the reasonableness of the restraint including its nature, ambit, duration, public interest, etc.

If the covenant is unreasonable then it is unenforcible. If however the covenant is reasonable, then the employer is entitled to apply for injunctive relief. As I mentioned earlier, closer examination is required, particularly as to what the employer claims to be his options as these would need to be challenged if appropriate.

 

[bwglaw]

can we also ask have you told your current employer? and is your old employer financially strapped for cash?

Have to be careful here so as not to bring the current employer into disrepute. The former employer may well be insured but this is not a valid reason for being complacent to the employers claims. If an employer values what he has restrained in the contract of employment he may well pay out to seek enforcement of the covenant. This can be a costly exercise for all parties.

 

[TotallySport]

First i agree with your point, but I am interest so i can learn so if I simply say seek legal advice I may miss something which I might need later on, so I will not offer legal advice, I might offer my opinion and strongle recommend seeking legal advice, but that could be taken out of the Ops hands if his current employer finds out and decides its not worth the risk, or is worth the risk and will foot the bill.

Which leads me onto.....Surely its about evaluating risk, based on all the information which as you have pointed out, we don't know, but could if we asked the OP some questions, we could very very very roughly give our opinion on the the risk, then its down to the OP to take that information and either use it or not wisely, mean seek proper legal advice.

 

[bwglaw]

I agree where you are coming from Totallysport, however, as part of any advice we do advise our clients as to risks i.e. what the employer could do, what the employer is entitled to, etc but we do not point out economical risks (other than likely costs to the client to defend a cause of action) because no-one knows whether the employer will or will not act upon his claims. The client usually can evaluate economical risk in the context of any advice we provide as we would state the merits of the employers claims.

 

[TotallySport]

Fair comment, if the OP wants to post more info i would be interets, but if not I will happily leave it to the pros off the forum.

 

[TG1971]

Does it make any difference that I didn't have a contract of employment for a year but was kind of forced to sign this 2 weeks (the same month) I was made redundant and the fact that I was threatened with dismissal, denied access to advice and told I wouldn't be going on an important business trip abroad that morning if I didn't sign there and then?


21.1 Since you will obtain Confidential Information in the course of your employment and personal knowledge of and influence over the company CRM database of the prospects and the clients of the Company, you agree to be bound by the terms contained in this contarct of employment.

21.2 During your normal hours of work you may not, without the prior written concent of the Company, devote any time to any business other than the business of the Company or to any public or charitable or endeavour.

21.3 During the period of your employment you will not, without prior written consent of the Company, undertake any work or other activity which may prejudicially affect your ability properly and efficiently to discharge your duties and responsibilities. The decision as to whether or not an activity would have a prejudicial effect shall be in the absolute discretion of the Company.

21.4 You will not at any time either during your employment or afterwards, to the detriment or prejudice of the Company or the Company' clients, use or divuldge to any person, firm or company, except in the proper course of your duties during your employment by the Company, any confidential information (which includes and is not limited to client data, details of the Company's clients, prospect data, details of any of the Company's prospects, any computer software requirements of cleints, any software quotes given by the Company to clients or prospect business, any software budgets given to the Company by a client or prospect business, details of software systems or requirements given by a prospect business....) identifying or relating to Company, details of which are not in the public domain, which have come to your knowledge during your emplyment.

21.5 On termination of your employment and for a period of 6 months following termination of employment, you will undertake not to work in any business which directly competes with the Company in selling any services for Microsoft Dynamics NAV software. This undertaking is to protect the legitimate interest of the Company and will be varied with formal written consent of the Directors of the Company and that consent will not be unreasonably withheld. The Directors reserve the right to withhold consent and insist you restrain from working for competing company selling services for Microsoft Dynamics NAV software for a period of 6 months from termination of employment where the Directors reasonably believe your employment with such competing company within 6 months of termination of emplyment will give a genuine unfair competitive advantage to a competing company.

21.6 On termination of your employment and for a period of 6 months following termination of employment, you will undertake not to work in any business which directly competes with the Company in selling any services for TRIMIT software. This undertaking is to protect the legitimate interest of the Company and will be varied with formal written consent of the Directors of the Company and that consent will not be unreasonably withheld. The Directors reserve the right to withhold consent and insist you restrain from working for competing company selling services for TRIMIT software for a period of 6 months from termination of employment where the Directors reasonably believe your employment with such competing company within 6 months of termination of emplyment will give a genuine unfair competitive advantage to a competing company.

21.7 You hereby undertake that you will not for a period of 6 months after the termination of your employment directly or indirectly canvass, solicit or interfere with or endeavour to canvass, solicit or interfere with, either on your own behalf or for any other person, firm, company, any of the clients of the Company as at the date of your termination of emplyment or clients in the previous 6 months before your termination, who at any time during the last 6 months of your employment you had access to or dealings with.

21.8 The Company puts considerable resourses and Company time into developing prospects, Prospects are businesses which the Company has dialogue with for the purpose of securing work from that prospect business for the future. You hereby undertake that you will not for a period of 6 months after termination of your employment directly or indirectly canvass, solicit or interfere with or endeavour to canvass, solicit or interfere with, either on your own behalf or for any other person, firm, company, any of the company, who at any time during the last 6 months of your employment you had access to or dealings with.

21.9 You hereby undertake that you will not for a period of 6 months after the termination of your employment directly or indirectly deal with, either on your own behalf or for any other person, firm, company, any of the clients of the company as at the date of your termination of employment or clients in the previous 6 months before your termination, who at any time during the last 6 months of your employment you had access to or dealings with.

21.10 You hereby undertake that you will not for a period of 6 months after the termination of your employment directly or indirectly deal with, either on your own behalf or for any other person, firm, company, any prospects of the Company, who at any time during the last 6 months of your employment you had access to or dealings with.

21.11 In this agreement each of the above clauses are independent and severable they shall be regarded as seperately enforceable. If any provisions are unenforceable but would be enforceable if any parts were deleted then the parties agree that such words must be deleted in order to make them enforceable.

21.12 If you are in breach of any of these undertakings in these clauses the Company will be entitled to seek injunctive or compensatory relief as contractual damages.

 

[TG1971]

I have not mentioned anything thus far to my new employer. My ex employer is straped for cash - although he may be dealing with a legal firm that offers their services on a 'No win, no fee' basis. Is that possible??? If it is, is it also possible to defend my position on the same basis?

 

[TotallySport]

First thing I would recommend is ring ACAS as its free, and might be able to shed some light on the issue with issuing the contract in the way they did and the actual terms of the contract.

Also ask them how to deal with your ex employer, also ask them about how to deal with it with your current employer.

If you unsure about what they say, please post back, or visit a lawyer locally they may give you an hour free on the condition if it does go further they get the case.

I cannot help further but wish you luck and if you do reply I will keep an eye on the thread, Good Luck

 

[internetspaceships]

Try this for size.

"Denying an individual the ability to work and make a living in an industry in which they are experienced and in which they have developed a specific set of skills is not something which would ever be done lightly by the courts. Accordingly, covenants which seek to prevent any form of competition with a former employer are rarely enforced.

Also worth bearing in mind is that if an employer terminates the employment relationship wrongfully, for example, by failing to follow contractual disciplinary procedures or by failing to give due notice under the contract, then the covenants will automatically become unenforceable, whether reasonable or not. An employer may make a payment in lieu of notice but this will not necessarily preserve the enforceability of the covenants, especially where there is no express right to make a payment in lieu of notice under the employment contract."


Ref: http://www.roydens.co.uk/content09.htm

 

[TG1971]

It appears my ex employer has sent the same letter to my new employer...

 

[internetspaceships]

It really isn't as much of an issue as you think. There are a number of ways to deal with this.

It's a real shame that there hasn't been any sensible advice given yet.

I've been on the receiving end of this before now both as an employee and as a Company owner.

You do need to chat to your new boss and hopefully he has the gumption to stand up and go speak to a solicitor about it, because it is not as bleak as it looks.

Especially if your old boss has no money.

There is also the fact that he made you redundant shortly after forcing you to sign this. This needs looking at too.

My personal take is to tell him to "do one" but I can't offer that as anything resembling formal advice because as has been pointed out, we are not in possession of the full facts.

 

[TG1971]

Thanks Internetspaceships.

Your words of encouragement are most welcome at this point. having landed my dream job after a decade of lurching from one poor choice, failed company, bully bosses to another, this has come as a bit of a blow.

I really didn't want to tarnish my name so soon after joining the company and whilst I was just establishing my credentials.

I will, of course fight this if I'm forced to and only hope my new employer stands behind me whilst doing so.

What is really annoying is that my ex employer hasn't once contacted the prospects, other than when he found out I was working for a competitor last week, since I was made redundant by hime in October. In real terms the prospect were advancing their investigation into ERP solutions with other vendors and partners without him. There is no way that he or any other partner would have been able to catch up in the process. The prospects simply wouldn't and don't have the time to go back and start from square one with a partner.

It is simply a matter of my ex employer chancing his arm and testing to see if he can make some quick money based on the restriction clauses. It's as simple and as plain as that.