non-compete in contractor agreement

[johndoeyu]

Hello everyone.

I'm doing some contracting work for a UK company (systems developer position - programmer in plain words) that until recently had local branch here (geographically in Europe, but not EU member country). They closed the branch here - but continue to have presence - office space and employees that signed contract directly with UK LTD entity.

The problem that I'm having is the non-compete clause (actually under Confidentiality) that states:
...
Confidentiality
The Contractor shall not at any time whilst hired by the Company (except so far as in necessary and proper in the course of his/her service) or at any time after expiry of the term of hire disclose to any person any trade secret or confidential information in relation to practice, business, dealings or affairs of the Company or any of the Company's customers or clients or as to any other confidential matters which may come to his/her knowledge by reason of his/her service to the Company.

During the Contractor's time of service or within 2 years from the date the Contractor's termination of service (for any reason), the Contractor shall not be undertake any role whether in full or part for any company or entity (as an affiliate, partner, sole trader, contractor or consultant) whereby the company or entity concerned competes in any way or extent whatsoever with the Company.

--- word for word from contract ---

The industry is SMS (send/receive SMS - basically you buy them cheap from operators/providers and sell them for a profit to customers) and clients are from all over the world.

The first paragraph is all fine. The second paragraph is what concerns me because it's very broad. On the other hand, from some research, I believe that it's exactly due to it's broadens unenforceable. For instance there is no limit on the location (whole world?!?) and 2 years seems to be longer than common 6 to 12 months.


Could you please comment on this?


I'm thinking about launching a website to offer one particular service that goes with SMS industry, but not sending/receiving SMS that is the core business of "the Company". I would obviously not use any contact info (clients/providers) I learned during consulting - not that I learned any, but in theory I can pull out all contact info from the DB.

Though it's entirely possible that company's customers would at some point contact me (that should be OK?) by finding the website using search engines and such. As I would also use search engines to find providers from whose I would buy the info/product and resale it - some of those could also be ones the Company is buying from.


The other problem is that I'm planning (not just thinking) of offering consulting (programming/development) services for the SMS industry in general in the future. As well thinking of producing and selling some products/solutions (if not releasing those under Open Source licence and getting more contracting work).


PS I was at the situation where I just had to get this job, so not signing the contract was not an option... There is also the notorious 2 months notice from my side vs. only 1 week notice from company's side.

[centurian]

Such restrictions are legal - known as restrictive covenants

http://employment.michelmores.com/pa...tail.asp?ID=59

In short, it's like IR35 in that it seems impossible to definately know one way or the other until you are actually in front of a judge.

However, the stronger the terms are, the less enforceable it appears to be. In particular, the judge watered down the highly restrictive clause for the hairdresser.

[expat]

This is interesting. It looks like they don't understand contracting. They seem to treat you as a person who has a job working for them, who may then leave and set up in competition to them. But the reality is that offering your services to different clients is your job.

[Not So Wise]

You are going to need a lawyer for this one, that clause in the second paragraph pretty much kills you from working in the sector for the 2 years, but because it is so broad it might be unenforceable

And even the lawyer will probably be only able to give you his opinion, case law on these kind of things is pretty thin on the ground in the UK afaik

[tim123]

This is interesting. It looks like they don't understand contracting. They seem to treat you as a person who has a job working for them, who may then leave and set up in competition to them. But the reality is that offering your services to different clients is your job.

No, they understand perfectly well

They want to employ a perma-temp and if you don't want to be a perma-temp they'll employ someone who does.

IME (of almost 30 years) this is the MO of all multinationals when hiring contractors.

To the OP, that non compete clause is ridiculously broad,. They don't have a hope of getting a court to enforce it

tim

[centurian]

This is interesting. It looks like they don't understand contracting. They seem to treat you as a person who has a job working for them, who may then leave and set up in competition to them. But the reality is that offering your services to different clients is your job.

Even in a B2B environment, restrictive coventants are still used - just it's called exclusivity.

I think that's why exclusivity restictions don't mean an automatic fail for IR35 (although they clearly don't help), because it can be argued that they exist in the business world.

[Ardesco]

Chat with a lawyer but I can't believe for a minute that a 2 year clause preventing you from working in the SMS industry would ever be upheld in a court of law.

[johndoeyu]

Thanks all - I'll see what I can do about talking to a lawyer - though not being in UK ... so it's not going to happen soon.

I know that this is legal - just wanted to get comments on enforceability of such a broad non-compete.

I'm hoping to actually remain in very good relationship with the company after full-time consulting is over. Hopefully I'll actually get most (if not all) services from them - instead "directly" from some other suppliers. Since I have very little chance of getting it as cheap as they can - simply because of the volume. And from time to time some part time consulting work.

[RichardCranium]

Haven't we had this discussion and concluded 6 months as the maximum a court would consider reasonable?