EMPLOYEE CONTRACT RESTRICTIONS - ARE THEY LEGALLY ENFORCEABLE IN TEH REAL WORLD?

[INFERNO]

2-3 years ago i lost 2 engineers whom i had known for 20 years to a competitor , they went from earning 45k to 75k each so i wished them well etc.., for one reason or another both have since returned in the last 6 months.
A year ago i updated the employee contracts to show a few changes, one thing was longer days but a 4 day week, and i had also added a clause in there to say they couldn't work for a direct competitor for a period of 12 months - in all honesty its something i probably wouldn't enforce and not something i was entirley happy doing, however it would severley harm me know if i lost someone to this same competitor at this time as work has taken a nosedive but i must cut some costs and fast through redundancy, i need to lose 2 people , 1 from purchasing and one from sales, if i make redundancies would the clause still be in effect? it doesnt make it clear or mention it in the contracts , reading it again it does read 'if the person is no longer employed' by my company.
Its not something i would fight or argue over more just curious and what to expect.

 

[IanSuth]

The honest answer is "it depends"

I went to a legal seminar on restrictive covenants a few years ago as being in recruitment at the time it was good to know the legal frameworks around etc.

The general theme was - the more defined the restriction in time and scope the more likely it would be upheld - so saying a customer facing member of staff couldn't go an work for a customer they dealt with in a similar role for a small number of months would likely be fine - saying they couldn't work for any competitor in a similar role for a year would not.

Generally 6 months was seen as a kind of break point - BUT - there are no hard and fast rules - it depends which judge you get on the day and you will have to pay for a high court injunction to try and enforce any such clause so budget on a min of £10k which you are unlikely to be able to claw back.

As for in the case of redundancy - no it is incredibly unlikely you can enforce anything - the courts do not like curtailing anyone's ability to make a living - you are saying "our company has no need of that position but we want to stop the person doing it trying to find work doing the same elsewhere" which is not really tenable (or fair). Remember you make roles redundant not people

 

[Mark T Jones]

Everybody has a right to work.

In making them redundant, the clause becomes unenforceable

 

[cjd]

As above ^^^ but as it's up to you whether you to act on a breach of contract - and you say you wouldn't in this case - it's purely academic.

 

[Newchodge]

Your clause would almost certainly fail anyway. It is too long and too broad in scope. A properly written clause would survive a redundancy dismissal.

 

[AvantageBroker]

2-3 years ago i lost 2 engineers whom i had known for 20 years to a competitor , they went from earning 45k to 75k each so i wished them well etc.., for one reason or another both have since returned in the last 6 months.
A year ago i updated the employee contracts to show a few changes, one thing was longer days but a 4 day week, and i had also added a clause in there to say they couldn't work for a direct competitor for a period of 12 months - in all honesty its something i probably wouldn't enforce and not something i was entirley happy doing, however it would severley harm me know if i lost someone to this same competitor at this time as work has taken a nosedive but i must cut some costs and fast through redundancy, i need to lose 2 people , 1 from purchasing and one from sales, if i make redundancies would the clause still be in effect? it doesnt make it clear or mention it in the contracts , reading it again it does read 'if the person is no longer employed' by my company.
Its not something i would fight or argue over more just curious and what to expect.

Restricted covenants are very common , particularly in my industry but have a mix results. They need to be precise and usually tied to location.

I don't agree with some of the above which state that they are unenforceable because I have seen that not to be the case. However, you should liaise with a lawyer with regard to the wording. To say your employees can't go to a competitor for 12 months is likely to be difficult to rely on due to not being tied to a location and I have seen it be argued that 12 months should be reduced to 6 months.

Whilst it may come into the thought of your employees when potentially leaving the company, i wouldn't bank on being able to rely on this and also consider the lawyer fees if they breach the covenant.

Is it going to be worth it?

 

[WaveJumper]

I think all of the above, it’s ok to put these into a contract but at the end of the day it’s going to come down too have you got big and deep enough pockets to enforce. If the company is big enough, the loss of a contract is big enough then someone may well find themselves facing a legal challenge. Otherwise I just view as a bit of a “fall back” clause for the many.

I would certainly recommend taking proper legal advice on constructing any form of contract especially HR