Non Compete clause in my contract - Can it be enforced?
Discussion
Breadvan72 said:
The case is called Hyprotech UK Ltd v David Frankum. Hyprotech is a UK subsidiary of the US Aspentech group. The rival company is Heat Transfer Research Inc, also from the US. The business context concerned software for the design and optimisation of heat exchangers in process industry settings, such as power stations.
The employee is not prevented from working in the industry. He is unable to work for a close rival in a job that would lead to a risk of use of confidential information. The former employer identified to the court various jobs that the employee could do without breaching the covenant.
The former employer has no difficulty attracting staff, as it is a successful company. Sometimes companies enforce covenants against an individual "pour encourager les autres", to remind employees that contracts are to be taken seriously.
If I were King, I would abolish restrictive covenants, but I am not King, nor likely to become so, and so I try to enforce covenants when people hire me to do so, and oppose them when people hire me to do that.
In this context why wasn't the IP covered by a patent if it concerned a physical thing+Software which should be patentable (appreciate that isn't a real word, but I work for a US company so anything goes) in Europe/US. That would have done away with the need for the covenant unless what he was working on was something so new and shiny that it hadn't been registered. The employee is not prevented from working in the industry. He is unable to work for a close rival in a job that would lead to a risk of use of confidential information. The former employer identified to the court various jobs that the employee could do without breaching the covenant.
The former employer has no difficulty attracting staff, as it is a successful company. Sometimes companies enforce covenants against an individual "pour encourager les autres", to remind employees that contracts are to be taken seriously.
If I were King, I would abolish restrictive covenants, but I am not King, nor likely to become so, and so I try to enforce covenants when people hire me to do so, and oppose them when people hire me to do that.
Edited by Breadvan72 on Sunday 9th August 23:03
If he understood the software/process and then thinks "Ahh, there is a better way of doing this but I am going to sell my idea to the highest bidder" (i.e. a rival company) would the covenant still apply or is it only to things he knows already, rather than future ideas?
The companies have lots of hard and soft IP, but also a lot of confidential data that is not protected by patents and the like. The case concerned know how, product development info, bugs and bug fixes, customer needs, all that sort of thing. The judgment is probably online somewhere if you want to know more about the facts.
Breadvan72 said:
Tough luck on the client if the clause is otherwise enforceable. Don't shoot me, I don't make the rules!
Can there really be any fond memories associated with law libraries, or Lancashire for that matter?
I have to say I find this incredible - as the client I'd take the business elsewhere. Indeed a client of mine (a mid-sized firm of solicitors) got around this by telling their clients to instruct me direct. I'm not totally convinced that this wasn't breaking the rules, but nobody said anything.Can there really be any fond memories associated with law libraries, or Lancashire for that matter?
As an undergrad everywhere that wasn't home seemed exciting and as an Essex boy Lancashire seemed impossibly cheap too. The women scared me though. Still do, in fact.
They have women in Lancashire? Crikey.
In most cases involving solicitors moving firms, deals are done, as everyone wants to avoid pissing off the clients, so whatever the covenant says there is often a carve up. Strictly speaking, however, an employer may be entitled to stipulate that employee X shall not deal with client Y for period Z after leaving the employment of employer A. There is a case about this point, but I CBA to recall what it is called.
PLUG PLUG PLUG: Third edition of Goulding and others on Employee Competition out next year from OUP. I have recently been updating the chapter on reasonableness in relation to covenants. When I was twenty, I hoped that I would get my name on the covers of OUP books about important historical questions. Instead I get my name on the cover of an OUP book about some dull law b
ks. Hey ho, life ain't always what you plan.
In most cases involving solicitors moving firms, deals are done, as everyone wants to avoid pissing off the clients, so whatever the covenant says there is often a carve up. Strictly speaking, however, an employer may be entitled to stipulate that employee X shall not deal with client Y for period Z after leaving the employment of employer A. There is a case about this point, but I CBA to recall what it is called.
PLUG PLUG PLUG: Third edition of Goulding and others on Employee Competition out next year from OUP. I have recently been updating the chapter on reasonableness in relation to covenants. When I was twenty, I hoped that I would get my name on the covers of OUP books about important historical questions. Instead I get my name on the cover of an OUP book about some dull law b
ks. Hey ho, life ain't always what you plan.I work in the software industry, and imo most employers have an exaggerated view of the importance and uniqueness of their IP.
I have several times refused to sign a blanket ban on working anywhere in a related industry for 12 or more months.
No offence to BV and co., but I have better things to waste my money on than lawyers.
I have several times refused to sign a blanket ban on working anywhere in a related industry for 12 or more months.
No offence to BV and co., but I have better things to waste my money on than lawyers.
AW111 said:
I work in the software industry, and imo most employers have an exaggerated view of the importance and uniqueness of their IP.
I have several times refused to sign a blanket ban on working anywhere in a related industry for 12 or more months.
No offence to BV and co., but I have better things to waste my money on than lawyers.
Which would be brilliant, if most people actually read what they were signing before signing it and understood it/got help to understand it. You are the exception, not the rule IMO.I have several times refused to sign a blanket ban on working anywhere in a related industry for 12 or more months.
No offence to BV and co., but I have better things to waste my money on than lawyers.
Agree on your first point though
Many employers have an absurdly inflated idea of how secret and valuable their secret stuff is, how stealable their clients are, and so on. Employers often overstate the risk posed by departing employees. For their part, employees often overstate the impact of covenants, which rarely actually stop them from earning a living. A plague on all their houses, and this area of the law is ripe for reform, but it won't be reformed, as it's not on anyone's agenda for reform.
Sensible employees, especially senior and well paid ones, negotiate their contracts. Reject a covenant if possible, negotiate it down if not possible. Opt for a garden leave clause if possible, as that way you get paid to work on your golf swing or improve your Caterham track time, or whatever. If the deal is big enough, lawyer up before you sign the deal. Lawyering up after everything has gone Pete Tong is great for me and those of my ilk, but terrible for everyone else.
Sensible employees, especially senior and well paid ones, negotiate their contracts. Reject a covenant if possible, negotiate it down if not possible. Opt for a garden leave clause if possible, as that way you get paid to work on your golf swing or improve your Caterham track time, or whatever. If the deal is big enough, lawyer up before you sign the deal. Lawyering up after everything has gone Pete Tong is great for me and those of my ilk, but terrible for everyone else.
Edited by anonymous-user on Wednesday 12th August 09:19
Mostly brassy and tough as old boots. 
Awesome and terrifying: I don't blame the previous poster for being scared. 
AyBee said:
Which would be brilliant, if most people actually read what they were signing before signing it and understood it/got help to understand it. You are the exception, not the rule IMO.
You don't have to stop at reading the contract. Were you to cross out and initial the onerous clause and then sign at the end, the employer would be in a bit of a quandary if/when you subsequently leave to work in the same field.EskimoArapaho said:
You don't have to stop at reading the contract. Were you to cross out and initial the onerous clause and then sign at the end, the employer would be in a bit of a quandary if/when you subsequently leave to work in the same field.
Exactly.Be interesting to see if their HR read it when it came back
Oooh ooh me, me.
I have recently started a new sales role (April start) - contract signed, but still serving my 6 months 'probation period'.
Last week, a direct competitor who I used to work alongside and I am familiar with posted an almost identical job offer on LinkedIn.
The attraction for me would be in the package and whether they would value me more than my current employer. I do however have a non-compete clause in my contract, which stipulates 12 months.
Two things -
Would the probation period have any bearing on how enforceable this is?
Would the fact that my contract has the 'start of employment' marked "TBC" have any bearing?
I have not been headhunted or even interviewed yet, but suffice to say I'm pretty sure I could walk into this job - current contract permitting.
Just curious to keep my options open - current employer has a habbit of extending 'probation' periods to suit their agenda. I don't particularly want to end up in that situation, even though I feel I have been performing well.
Any help much 'preciated.
I have recently started a new sales role (April start) - contract signed, but still serving my 6 months 'probation period'.
Last week, a direct competitor who I used to work alongside and I am familiar with posted an almost identical job offer on LinkedIn.
The attraction for me would be in the package and whether they would value me more than my current employer. I do however have a non-compete clause in my contract, which stipulates 12 months.
Two things -
Would the probation period have any bearing on how enforceable this is?
Would the fact that my contract has the 'start of employment' marked "TBC" have any bearing?
I have not been headhunted or even interviewed yet, but suffice to say I'm pretty sure I could walk into this job - current contract permitting.
Just curious to keep my options open - current employer has a habbit of extending 'probation' periods to suit their agenda. I don't particularly want to end up in that situation, even though I feel I have been performing well.
Any help much 'preciated.
It will, as ever, depend on the details.
If you couldn't take this job, what sort of thing could you do?
How geographically restrictive is the non-compete?
How much confidential information do you have access to? (In very broad terms only of course!)
How specific and small is the industry? Could you realistically only sell to an existing client base or are there plenty of competitors - a non-compete will be different for some sectors where there may be only one or two massive clients or subcontracting to their suppliers vs. one where there are thousands of potential customers.
As ever, it's fair to say that non-compete clauses are hard to enforce but horrible if they are successfully enforced against you!
If you couldn't take this job, what sort of thing could you do?
How geographically restrictive is the non-compete?
How much confidential information do you have access to? (In very broad terms only of course!)
How specific and small is the industry? Could you realistically only sell to an existing client base or are there plenty of competitors - a non-compete will be different for some sectors where there may be only one or two massive clients or subcontracting to their suppliers vs. one where there are thousands of potential customers.
As ever, it's fair to say that non-compete clauses are hard to enforce but horrible if they are successfully enforced against you!
I would have expected that all terms of an employment contract become null and void once that contract has ended, and that would include any no-compete clauses therein. If the terms are to be enforceable after the employment term has ended, then the previous employer must pay some consideration towards the ex-employee, otherwise the ex-employee would be free to do as he wishes.
I always get those unenforceable statements removed from my employment contracts. I was told once that "ah, we wouldn't chase you on that" I replied with "then you've no problem removing it and there's no ambiguity then."
I detest the majority of American company work practices that are bleeding across into European working conditions, and more than a few are directly against the local employment regulations. The HR depts tend to make the assumption that the people signing contracts are uneducated about what the contracts can mean, and I've also learned the hard way that the ultimate purpose of HR in conpanies is to protect the company from the employees and employment legislation.
I always get those unenforceable statements removed from my employment contracts. I was told once that "ah, we wouldn't chase you on that" I replied with "then you've no problem removing it and there's no ambiguity then."
I detest the majority of American company work practices that are bleeding across into European working conditions, and more than a few are directly against the local employment regulations. The HR depts tend to make the assumption that the people signing contracts are uneducated about what the contracts can mean, and I've also learned the hard way that the ultimate purpose of HR in conpanies is to protect the company from the employees and employment legislation.
They do pay a consideration, it's called your wages
Problem is that most people simply don't understand (or read) their contracts of employment. For 99% of folks, it doesn't matter. For the 1% of people for whom it does matter, it's a lesson. If they are aware of the issue, hopefully, it's reading about a harsh lesson for somebody else, if not, well, life is a learning experience.
Agree about Personnel though, bless em. Not good enough to be teachers
Problem is that most people simply don't understand (or read) their contracts of employment. For 99% of folks, it doesn't matter. For the 1% of people for whom it does matter, it's a lesson. If they are aware of the issue, hopefully, it's reading about a harsh lesson for somebody else, if not, well, life is a learning experience.
Agree about Personnel though, bless em. Not good enough to be teachers
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