Accept Restrictions or Challenge?

[Supercoach]

Hi,
I understand that the restrictions below are pretty standard in certain service businesses but do they really stand up in law?

For a period of 6 months after termination:
1) directly or indirectly compete with the company's legitimate business by being engaged by any person, business entity, existing client, potential client or other organisation whatsoever, with whom you or the company has had contact with in the period of 12 months prior to the date of termination of your employment.

... the term 'not compete' shall mean that the Employee shall not own, manage, operate, consult or be employed in a business substantially similar with the present business.

 

[Newchodge]

Hi,
I understand that the restrictions below are pretty standard in certain service businesses but do they really stand up in law?

For a period of 6 months after termination:
1) directly or indirectly compete with the company's legitimate business by being engaged by any person, business entity, existing client, potential client or other organisation whatsoever, with whom you or the company has had contact with in the period of 12 months prior to the date of termination of your employment.

... the term 'not compete' shall mean that the Employee shall not own, manage, operate, consult or be employed in a business substantially similar with the present business.

Currently, yes they are probably legally enforceable. There is talk of the law changing but that could take years.

 

[Supercoach]

Currently, yes they are probably legally enforceable. There is talk of the law changing but that could take years.

Thanks for this, but to 'not be employed in a business ...' potentially takes away the ability to earn a living, does it not?

 

[Newchodge]

Thanks for this, but to 'not be employed in a business ...' potentially takes away the ability to earn a living, does it not?

Yes it does. But the business is limited to one with which you have had dealings through your ex employer, which may make it OK. It depends on the circumstances and the feelings of the judge on the day.

 

[Supercoach]

Yes it does. But the business is limited to one with which you have had dealings through your ex employer, which may make it OK. It depends on the circumstances and the feelings of the judge on the day.

Hi Cyndy, I don't read it like that.

'Not Compete' looks pretty specific to me and is on a separate section ( sorry if I should have said) and appears to encompass more than simply existing clients.
I have a PDF with the full terms but cannot find a way to post it.

 

[Newchodge]

Hi Cyndy, I don't read it like that.

'Not Compete' looks pretty specific to me and is on a separate section ( sorry if I should have said) and appears to encompass more than simply existing clients.
I have a PDF with the full terms but cannot find a way to post it.

The only way to kmow for certain if a non-compete clause is enforceable is to breach it and see what the court says. You can ask a lawyer who will look at all the terms of the contract, but they can only givee an informed opinion.

 

[DontAsk]

... the term 'not compete' shall mean that the Employee shall not own, manage, operate, consult or be employed in a business substantially similar with the present business.

That last one, read on its own is bullshit. It's way too restrictive. They can't prevent you earning a living, even with a direct competitor. They can't stop you doing anything or working for anyone, unless they take you to court. They will have to demonstrate a loss, e.g., if you "steal" their customers or IP, to have any grounds. Merely being employed by a competitor is not grounds to take you to court.

 

[Newchodge]

That last one, read on its own is bullshit. It's way too restrictive. They can't prevent you earning a living, even with a direct competitor. They can't stop you doing anything or working for anyone, unless they take you to court. They will have to demonstrate a loss, e.g., if you "steal" their customers or IP, to have any grounds. Merely being employed by a competitor is not grounds to take you to court.

But, that last one is a definition of the term compete. so has to be read in conjunction with the first para, which limits those he cannot work for to businesses with which their has been contact.

No one can give a fair evaluation without reading the entire contract. Paragraphs in isolation are useless.

 

[fisicx]

The way I read it is:

I worked in sales at Widget Company A. If I leave I can't get a job at Company B who uses Widgets from Company A because I had contact with them in the last 12 months.

Which doesn't sound very enforceable.

 

[Newchodge]

I've just realised that the title contained a question which was not in the body of the message.

When? On being offered the job or on leaving?

 

[DontAsk]

But, that last one is a definition of the term compete. so has to be read in conjunction with the first para, which limits those he cannot work for to businesses with which their has been contact.

It's a definition of "not compete" which doesn't occur in the first paragraph.

It could be read as being in addition to the terms in the first paragraph.

so

For a period of 6 months after termination:
1) directly or indirectly compete with the company's legitimate business by being engaged by any person, business entity, existing client, potential client or other organisation whatsoever, with whom you or the company has had contact with in the period of 12 months prior to the date of termination of your employment.

refers to people the employee has had contact through theor existing p[osition

AND

... the term 'not compete' shall mean that the Employee shall not own, manage, operate, consult or be employed in a business substantially similar with the present business.

Means no employment in a similar business.

It's just badly written.

 

[IanSuth]

"you or the company has had contact with in the period of 12 months prior to the date of termination of your employment."

This MAY be too broad a term if the company you are working for is huge - for Sproggitt&Sons widget maker the number of clients you have contact with individually may be a large % of all clients so fair to restrict your contact with them for a small period after leaving if they are current clients.

But for HSBC or Amazon the companies they have had contact with in the last 12 months is a hige % of all possible companies you could work with or for.

It is all dependant upon context and nobody can really give an exact answer - what it comes down to is "do you think the employer would be bothered to spend £10k+ in trying to stop you doing x" if so then don't do X, if not, do it.

 

[Supercoach]

I've just realised that the title contained a question which was not in the body of the message.

When? On being offered the job or on leaving?

I should have clarified -it's on leaving

 

[Supercoach]

"you or the company has had contact with in the period of 12 months prior to the date of termination of your employment."

This MAY be too broad a term if the company you are working for is huge - for Sproggitt&Sons widget maker the number of clients you have contact with individually may be a large % of all clients so fair to restrict your contact with them for a small period after leaving if they are current clients.

But for HSBC or Amazon the companies they have had contact with in the last 12 months is a hige % of all possible companies you could work with or for.

It is all dependant upon context and nobody can really give an exact answer - what it comes down to is "do you think the employer would be bothered to spend £10k+ in trying to stop you doing x" if so then don't do X, if not, do it.

That's the essence of my query. Is this simply a threat - too broad to be reasonable - written into contracts because most employees will not challenge it?

 

[IanSuth]

That's the essence of my query. Is this simply a threat - too broad to be reasonable - written into contracts because most employees will not challenge it?

Having been to a few seminars on how to write such restrictive terms the general consensus was, the tighter you try and make it the less likely it is to be enforced (due to restraint of trade) but a fair agreement that is limited in time and scope will likely be upheld.

NOBODY can give you an exact answer other than the high court judge on the day - so as I said it comes down to whether you think your current co would spend £10k+ to find out. The only potentially iffy bit i could see was that it says all clients the company has dealt with not all companies you have dealt with, and that depends on the size of the company.

A lot would obviously depend upon the nature of your leaving as well - if you spend 3 months setting up a company in direct opposition, suddenly leave without notice and set up the following Monday directly targeting existing customers expect a legal fight. If you instead leave on good terms in a timely manner and having done things like agree a list of companies you def will not approach in the 6 months then you are unlikely to need any legal input.

 

[Newchodge]

I should have clarified -it's on leaving

Then there is nothing for you to challenge. On accepting the role you could challenge the clause, but that would be stupid sq it may mean they would make anh unenforceable clause better worded and enforceable.

You can either ignore it and hope they don't challenge your behaviour or accept it.

 

[Supercoach]

Having been to a few seminars on how to write such restrictive terms the general consensus was, the tighter you try and make it the less likely it is to be enforced (due to restraint of trade) but a fair agreement that is limited in time and scope will likely be upheld.

NOBODY can give you an exact answer other than the high court judge on the day - so as I said it comes down to whether you think your current co would spend £10k+ to find out. The only potentially iffy bit i could see was that it says all clients the company has dealt with not all companies you have dealt with, and that depends on the size of the company.

A lot would obviously depend upon the nature of your leaving as well - if you spend 3 months setting up a company in direct opposition, suddenly leave without notice and set up the following Monday directly targeting existing customers expect a legal fight. If you instead leave on good terms in a timely manner and having done things like agree a list of companies you def will not approach in the 6 months then you are unlikely to need any legal input.

That makes sense -many thanks

 

[The Resolver]

The 6 months is reasonable.

"Potential client" is ,however, too wide and could be anyone who responded to marketing but was not prepared to buy the service who cannot therefore be seen as lost.

The descriotion of 'not compete' is itself too wide but could be acceptable ot the extent that it is itself limited to compnnies offering a service that is on offer by the OP's ex-employer.

What does the employer sell?

You might engage with the employers to agree the extent of the restriction,making it clear that ,if they claim too broad a defintion,they may lose alll right to restrict you. But does the Agreement provide for the continuation of clauses edited down that may otherwise in part have beenn unenfroceable?. You can email me the Employment Contract ([email protected])

Have you a pending claim over the nature of a dismissal in which case you need to consider including agreement to ignore the clause as part of a strategy to reach a settlement, i.e. lower compensation in return for withdrawal of the restriction (if you have another company to go to straight away then your compensation may be minimal anyway- but do not tell them you have that offer of employment!)

 

[Supercoach]

Then there is nothing for you to challenge. On accepting the role you could challenge the clause, but that would be stupid sq it may mean they would make anh unenforceable clause better worded and enforceable.

You can either ignore it and hope they don't challenge your behaviour or accept it.

Thank you

 

[Supercoach]

The 6 months is reasonable.

"Potential client" is ,however, too wide and could be anyone who responded to marketing but was not prepared to buy the service who cannot therefore be seen as lost.

The descriotion of 'not compete' is itself too wide but could be acceptable ot the extent that it is itself limited to compnnies offering a service that is on offer by the OP's ex-employer.

What does the employer sell?

You might engage with the employers to agree the extent of the restriction,making it clear that ,if they claim too broad a defintion,they may lose alll right to restrict you. But does the Agreement provide for the continuation of clauses edited down that may otherwise in part have beenn unenfroceable?. You can email me the Employment Contract ([email protected])

Have you a pending claim over the nature of a dismissal in which case you need to consider including agreement to ignore the clause as part of a strategy to reach a settlement, i.e. lower compensation in return for withdrawal of the restriction (if you have another company to go to straight away then your compensation may be minimal anyway- but do not tell them you have that offer of employment!)

Many thanks. I will email the contract

 

[Newchodge]

But does the Agreement provide for the continuation of clauses edited down that may otherwise in part have beenn unenfroceable?

Hi Graham

I have seen a few of these clauses. Are you aware of any caselaw where they have been found to work? I would have thought they would be unenforceable through uncertainty.

 

[The Resolver]

There are many reports here

 

[Supercoach]

There are many reports here

Brilliant!

 

[Newchodge]

There are many reports here

Thanks. It would appear that the right to sever cerrtain words exists, provided that would not result in the need to add to or modify the wording of the rest of the covenant.

I have seen it suggested that, for example, if a 2 year restriction is too much (which it obviously is) a court can agree to change that to 6 months, after the event. I remain unconvinced that could happen.

 

[PeterTaylor]

Hi,
I understand that the restrictions below are pretty standard in certain service businesses but do they really stand up in law?

For a period of 6 months after termination:
1) directly or indirectly compete with the company's legitimate business by being engaged by any person, business entity, existing client, potential client or other organisation whatsoever, with whom you or the company has had contact with in the period of 12 months prior to the date of termination of your employment.

... the term 'not compete' shall mean that the Employee shall not own, manage, operate, consult or be employed in a business substantially similar with the present business.

Yes, they are enforceable as they are not too extreme or restrictive. They are not stopping you from trading but for 6 months you are not allowed to entice their clients. If they have said you can't contact anyone or work in the industry then they would be dismissed.

 

[The Resolver]

Yes, they are enforceable as they are not too extreme or restrictive. They are not stopping you from trading but for 6 months you are not allowed to entice their clients. If they have said you can't contact anyone or work in the industry then they would be dismissed.

It is more than clients, Peter. The wording prevents contact with people who have not been clients but merely 'potential' clients ..... "with whom you or the company has had contact with in the period of 12 months prior to the date of termination of your employment". "Contact" should be restricted at least to people who responded to indicate potential to be clients and not cover anyone who received a promotional email etc but did not respond. It should also clealrly exclude potential clients who say ''no''. I think in the absence of such a limitation 'potential clients; makes it too wide.

 

[PeterTaylor]

It is more than clients, Peter. The wording prevents contact with people who have not been clients but merely 'potential' clients ..... "with whom you or the company has had contact with in the period of 12 months prior to the date of termination of your employment". "Contact" should be restricted at least to people who responded to indicate potential to be clients and not cover anyone who received a promotional email etc but did not respond. It should also clealrly exclude potential clients who say ''no''. I think in the absence of such a limitation 'potential clients; makes it too wide.

You are quite right, I missed "potential" client which may make it too wide - if they had excluded that it would stick much better. As ever a solicitor will give best advice but you never quite know until or when it tested in court.