Restrictive covenants

[Spoiler]

First off - anyone recommend a good employment law expert?

Second - I'd appreciate thoughts on the following. I've got the following restrictive covenant in my permie contract:

Obligations after employment
The Employee shall not within the restricted area directly or indirectly:
3.1 For the period of 12 months after the termination date, hold any material interest in any business which is or shall be wholly or partly in competition with any of the businesses.

Unreasonable? It isn't specific about a particular geographical area; 12 months seems a little excessive. Any idea what the penalty could be if this was enforced in court?

I guess it doesn't become a legal issue until someone actually takes legal action, and there may be some posturing prior to that. But, as it is potentially 4 permies leaving, not just one, and it will be competing in the same market place, then permie company may be inclined to progress.

There are additional clauses about poaching existing customers & staff but we're fine with those. No plans to steal either. It's the one that basically implies a restraint of trade.

As per the first point, I AM going to seek out the relevant professional. Just wanted to do a little research myself first.

[northernladuk]

Research oddly enough includes the word 'search' in it. This is asked quite alot and there are a lot of threads on it...

12 months is not enforceable due to your human 'right to work' or something. 6 months is. Normally it isn't generally enforced if the work you are going to do does not in anyway affect your ex employer. There has to be some common sense applied. If you are a DBA at one company and go to clean plants at on oe his clients there is no conflict so would be a pretty jobsworth HR person that would hold you to the restriction. If you design databases for a client and that client then wants you to design databases from them it is pretty obvious your ex-employer would lose out so would be easily enforceable.

The thing about legal is a last resort, the two employers could chat amongst themselves and drop you like a stone to avoid it going legal etc.

If your plan B includes any knowledge taken from your ex employer, including customers/contacts created while being there then yes it is very enforceable and your ex employer will enforce it rigorously I expect.

Remember to sue someone generally you have to prove loss. If you take your employers staff/information to then compete (and make some gains) he is in a perfect position to take you over a barrel. Professional advice is essential here.

[Spoiler]

Research oddly enough includes the word 'search' in it. This is asked quite alot and there are a lot of threads on it...

12 months is not enforceable due to your human 'right to work' or something. 6 months is. Normally it isn't generally enforced if the work you are going to do does not in anyway affect your ex employer. There has to be some common sense applied. If you are a DBA at one company and go to clean plants at on oe his clients there is no conflict so would be a pretty jobsworth HR person that would hold you to the restriction. If you design databases for a client and that client then wants you to design databases from them it is pretty obvious your ex-employer would lose out so would be easily enforceable.

The thing about legal is a last resort, the two employers could chat amongst themselves and drop you like a stone to avoid it going legal etc.

If your plan B includes any knowledge taken from your ex employer, including customers/contacts created while being there then yes it is very enforceable and your ex employer will enforce it rigorously I expect.

Point taken. I did search on here but most of it was about agency contracts with contractors. Similar thing though.

We are taking knowledge learnt (skills), not things like code to implement elsewhere so I believe that's in our favour. No customers, contacts, staff will be taken. Also the new employer is ourselves.

[northernladuk]

Point taken. I did search on here but most of it was about agency contracts with contractors. Similar thing though.

We are taking knowledge learnt (skills), not things like code to implement elsewhere so I believe that's in our favour. No customers, contacts, staff will be taken. Also the new employer is ourselves.

It is but I expect the wording in the clause will include clients and suppliers. Which bit are you worried about as you created the thread?

Knowledge learnt / experience I guess is yours, isn't tangible and thats what a career is about but just to be uber pedantic I would check you contract for intellectual property clauses incase you slip in to that.

[pmeswani]

First off - anyone recommend a good employment law expert?

Second - I'd appreciate thoughts on the following. I've got the following restrictive covenant in my permie contract:

Obligations after employment
The Employee shall not within the restricted area directly or indirectly:
3.1 For the period of 12 months after the termination date, hold any material interest in any business which is or shall be wholly or partly in competition with any of the businesses.

Unreasonable? It isn't specific about a particular geographical area; 12 months seems a little excessive. Any idea what the penalty could be if this was enforced in court?

I guess it doesn't become a legal issue until someone actually takes legal action, and there may be some posturing prior to that. But, as it is potentially 4 permies leaving, not just one, and it will be competing in the same market place, then permie company may be inclined to progress.

There are additional clauses about poaching existing customers & staff but we're fine with those. No plans to steal either. It's the one that basically implies a restraint of trade.

As per the first point, I AM going to seek out the relevant professional. Just wanted to do a little research myself first.

Silly question, is this for a Perm or Contract role? If it is a Contract role, you may want to get the word "Employee" removed, unless you are happy to be inside IR35.

6 to 12 months clauses is not unheard off for perm roles, but not enforceable for 12 months after termination. So I would negotiate the 12 month clause as much as possible to 6 months or less. Good luck.

[Spoiler]

It is but I expect the wording in the clause will include clients and suppliers. Which bit are you worried about as you created the thread?

Basically the clause appears to imply that I cannot hold any position, even as an employee, in a company that competes with the current one. Not just for existing clients, but also for new business.

Having done a little more searching, I'm pretty confident this will not be enforced:

- Any attempt by your employer to deny you the right to make a living in your chosen industry or profession is taken very seriously by the court.
- If, for example, your contract of employment imposes a blanket ban on you working for a direct competitor of your employer, even for a short period of time, this is unlikely to be enforced by the court.
- What your employer cannot do is prevent you from using your "skill and knowledge", even if you acquired that skill and knowledge whilst working for your employer.

(I guess this is someone's interpretation though).

Appointment with a solicitor now booked for next week.

[Spoiler]

Silly question, is this for a Perm or Contract role? If it is a Contract role, you may want to get the word "Employee" removed, unless you are happy to be inside IR35.

6 to 12 months clauses is not unheard off for perm roles, but not enforceable for 12 months after termination. So I would negotiate the 12 month clause as much as possible to 6 months or less. Good luck.

For a perm role - actually we'll own/be employed by the company.

[northernladuk]

- Any attempt by your employer to deny you the right to make a living in your chosen industry or profession is taken very seriously by the court.

Indeed but to use an employers 'resources' (can't think of the proper word) to give you an advantage in the same market will also be taken pretty dimly by a court. Again, often in court if you can prove a loss you will win.

- If, for example, your contract of employment imposes a blanket ban on you working for a direct competitor of your employer, even for a short period of time, this is unlikely to be enforced by the court.

I think the term blanket ban is the keyword here. A restrictive covenant isn't a blanket ban. It is a specific clause to protect the employers rights/revenue stream/whatever.

- What your employer cannot do is prevent you from using your "skill and knowledge", even if you acquired that skill and knowledge whilst working for your employer.

Totally agree with this. Just common sense surely.

(I guess this is someone's interpretation though).

Most definitely. You can bet your bottom dollar someone that is line to lose out will have a totally different view on this, particularly if they can prove a loss.

[Scoobos]

I've had clauses like that in the past, and to be honest I've broken nearly all of them; but never in a way that would hurt my former client.

I think the bottom line is - DON'T steal customers, or slip company secrets and you're fine.

[Spoiler]

I think the term blanket ban is the keyword here. A restrictive covenant isn't a blanket ban. It is a specific clause to protect the employers rights/revenue stream/whatever.

In this case, I don't think the clause is specific enough in terms of geographic location or services. It's too generic.