Help: employment law and non-compete
Discussion
Nothing to report yet, expect there will be news come Wednesday. We (collectively - the new company's solicitors) are sending a response on Tuesday. I'm not sure of the thinking behind this, but there must be a reason. Perhaps it is linked to the ultimatum outlined in the letter I received, which requested a response from me by Wednesday afternoon. Of course the longer this goes on, the longer I'm going unpaid / out of work. That's the stressful part!
Another hilarious point being argued is that I have 'trade secrets' which I have learned in the 6 months I've been with the company. I can hand on heart say I've learned very little about the industry. What I have learned is how not to run a large company, and the lack of productivity resultant of low morale and negative attitudes towards the company. What I know about the industry itself (doors) is solely what I've learned in the previous 7 years of working in it!
The good news is the rent is covered for the next 2 months. The bad news.is that the money had been put aside for something else...
Another hilarious point being argued is that I have 'trade secrets' which I have learned in the 6 months I've been with the company. I can hand on heart say I've learned very little about the industry. What I have learned is how not to run a large company, and the lack of productivity resultant of low morale and negative attitudes towards the company. What I know about the industry itself (doors) is solely what I've learned in the previous 7 years of working in it!
The good news is the rent is covered for the next 2 months. The bad news.is that the money had been put aside for something else...
C.A.R. said:
... We (collectively - the new company's solicitors) are sending a response on Tuesday. I'm not sure of the thinking behind this, but there must be a reason. Perhaps it is linked to the ultimatum outlined in the letter I received, which requested a response from me by Wednesday afternoon. ...
You are Sherlock Holmes AICMFP!Joking apart, the solicitors ought to have explained to you what is going on (they are replying to the other side's letter is what); or are they acting just for the company and not for you? If for you, ask them to explain anything that you are unclear about. It's their job!
Perhaps because the solicitors have not been explaining things to you as they should, you appear to be misunderstanding what is meant in this context by trade secrets. The term does not refer to information about the industry in general, as that could not be protected by the ex employer. It refers to confidential information specific to the ex employer. There may be a dispute as to what you know, and whether what you know can properly be classed as confidential, but such disputes are normally reserved for trial, and not determined at the initial hearing. So long as the employer can sufficiently identify some information that can credibly be claimed as confidential, that may be sufficient to justify an interim injunction (if certain other tests are passed). By the way, do you have documents or electronic records containing any information from the ex employer?
You need to sit down with the solicitors and obtain clear advice as to how strong or weak the case against you is. Just because you think that the case is ill founded, that does not mean that it is, especially as the law in this area tends to favour the employer's side of the argument. If the case heads towards court, you will need advice and representation from an advocate, who will usually be a barrister. He or she should be from a recognised set of chambers that deals with cases of this kind, not just some general purpose barrister. You need someone from Littleton, 11 KBW, Old Square, Devereux, or Blackstone. If your new employer is paying, it will choose the lawyers, but this is not a case for just any passing lawyer. Hopefully the solicitors will be experienced in business litigation, and not just some generic High Street firm.
To understand the challenge that you may be facing, some extracts from the case law may assist:
Lord Denning in Litlewoods v Harris [1977] 1 WLR 1472-
It is thus established that an employer can stipulate for protection against having his confidential information passed on to a rival in trade. But experience has shown that it is not satisfactory to have simply a covenant against disclosing confidential information. The reason is because it is so difficult to draw the line between information which is confidential and information which is not and it is very difficult to prove a breach when the information is of such a character that a servant can carry it away in his head. The difficulties are such that the only practicable solution is to take a covenant from the servant by which he is not to go to work for a rival in trade. Such a covenant may well be held to be reasonable if limited to a short period.
Lord Justice Toulson in Thomas v Farr [2007] ICR 932 -
In order to establish that the inclusion of a non-competition clause in an employment contract was reasonably necessary for the protection of the employer's interest in confidential information, the first matter which the employer obviously needs to establish is that at the time of the contract the nature of the proposed employment was such as would expose the employee to information of the kind capable of protection beyond the term of the contract (ie trade secrets or other information of equivalent confidentiality). The degree of the particularity of the evidence required to establish that matter must inevitably depend on the facts of the case. To say this is to say nothing new. Aldous LJ stated the principle in Scully (UK) Ltd v Lee [1998] IRLR 259, 263, para 23:
“In cases where a restrictive covenant is sought to be enforced, the confidential information must be particularised sufficiently to enable the court to be satisfied that the plaintiff has a legitimate interest to protect. That requires an inquiry as to whether the plaintiff is in possession of confidential information which it is entitled to protect. (See Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472 at 1479 F.) Sufficient detail must be given to enable that to be decided but no more is necessary.”
Provided that the employer overcomes that hurdle, it is no argument against a restrictive covenant that it may be very difficult for either the employer or the employee to know where exactly the line may lie between information which remains confidential after the end of the employment and the information which does not. The fact that the distinction can be very hard to draw may support the reasonableness of a non-competition clause. As was observed by Lord Denning MR in Littlewoods Organisation Ltd v Harris [1977] 1 WLR 1472 , 1479, and by Waller LJ in Turner v Commonwealth & British Minerals Ltd [2000] IRLR 114 , para 18, it is because there may be serious difficulties in identifying precisely what is or what is not confidential information that a non-competition clause may be the most satisfactory form of restraint, provided that it is reasonable in time and space.
C.A.R. said:
Of course the longer this goes on, the longer I'm going unpaid / out of work. That's the stressful part!
There's nothing I can add to what Breadvan has said regarding the legal arguments apart from reiterating that there is a gulf in difference in knowledge and expertise between 'Jones and Sons' who does conveyancing, wills and divorces in the high street and a firm who does business litigation day in, day out. My only piece of advice is that at this stage here, do not be under any illusion that the new employer is going to look after your interests over theirs. And, if they are employing a solicitor, they will be doing the same. It would be a reasonable guess that they are not going to run at this carte blanche. There may be a point, possibly a few weeks down the line where they say "This is as much as we can do.".
If I were in your shoes, I'd be rapidly looking for a Plan B should Plan A fail.
Very sensible advice. I recently enforced a covenant against a rather cocky employee who seemed to believe that there was no chance that the claim against him would succeed. Well, succeed it did. As I said above, I don't make the rules, or pick and choose my clients, but sometimes I have to help enforce the rules. The rather over confident bloke, who seemed to have been assured that all was well, perhaps by a well meaning friend or a duff lawyer, suddenly found himself looking for a new job, and facing a very large legal bill. He didn't do himself any favours by appearing rather glibly dismissive of the claim against him when in the witness box. The Judge thought him an un co-operative witness. Don't let that happen to you!
Breadvan72 said:
The rather over confident bloke, who seemed to have been assured that all was well...
I try to keep abreast of this subject being an employer, but my only practical experience was discussing this with a friend who owns a large hairdressing salon.As 'small fry' as it sounds, this place is the biggest in the large town centre and has a seven figure turnover so is worth protecting. Additionally in the industry, ideally a hairdresser would like to leave their employer and set up close-by and 'take' their 'old customers' with them, by fair mean or foul.
The contracts were the national federation standard ones which stipulated not working for or starting another competitor for 6 months in a 1 (or 2 IIRC) mile radius. So not oppressive, and certainly not stopping someone using their trade somewhere local.
The first time it happened, a lower stylist upped and left and started a salon 500m away the other side of the pedestrian area. The second time I was confided in for advice, it was the deputy manger who not only stole the customer database on a USB stick, but set up with another partner 50m away. Both times I urged him to take specialist advice because in my amateur but reasonably knowledgable opinion that his covenants were good, but instead he used the 'lawyer helpline' as included in a trade membership. Both times he was told he'd get nowhere. This was about 8 years ago.
So, it may possibly be that employees are confident because years ago this type of thing was not followed up as much as now, and the case law has since been refined and this helps enforcement?
Also, it's an example where specialist advice you pay for will get you more than something more general.
I've been in this situation three times, once I was up against a Magic Circle firm, but every time I've 'got away' with it
The issue has been whether I've actively taken business from the company or not. In the example of the hairdresser, the idea behind that one is that the hairdresser wanted to take away clients that the salon had, to their own startup.
It's a little different when you're moving from one company to another. Not 100% that a company wont come after you, because the chances are if you're going to a competitor then they're hiring you because you have relationships with customers that they want. In my cases, I've never taken a customer from the company I used to work for. If you can demonstrate that you're going there to do something slightly different, there's better chances of not being reamed. The onus became more of a 'prove it' after taking the old company's lawyers down a certain road.
As everyone else said though, insured advice (as in, it's nowt to do with us if it goes tits)
The issue has been whether I've actively taken business from the company or not. In the example of the hairdresser, the idea behind that one is that the hairdresser wanted to take away clients that the salon had, to their own startup.
It's a little different when you're moving from one company to another. Not 100% that a company wont come after you, because the chances are if you're going to a competitor then they're hiring you because you have relationships with customers that they want. In my cases, I've never taken a customer from the company I used to work for. If you can demonstrate that you're going there to do something slightly different, there's better chances of not being reamed. The onus became more of a 'prove it' after taking the old company's lawyers down a certain road.
As everyone else said though, insured advice (as in, it's nowt to do with us if it goes tits)
That lawyer helpline sounds like it was giving negligent advice, if the employee had actually taken the customer database (a breach of the European Database Right, which is analogous to a copyright and can be a slam dunker cause of action for the savvy employer). So Justin one, lawyer nil in terms of correctness of advice, but ill advised client kiboshed regardless.
One of the problems here is that the starting point remains that restrictions on competition per se are unlawful. Lawyers recall that point from their law of contract classes, but unless they are up to speed with the state of the art in the drafting of covenants and the numerous cases on the subject, they may just trot out that mantra, which becomes the bloke in pub mantra. The reality is that, although the courts pay lip service to the notion that restrictions on competition are no go, as the cases cited above show, they regularly do uphold restrictions on competition.
There are not many hairdresser cases these days, although even as great a jurist as Lennie Hoffmann was daft enough to enforce an area restraint on a young hairdresser when he was in the Court of Appeal in the 90s. You will have noticed that Lord Denning established the modern line on non-competes. One of the things about Denning was that he absolutely insisted that contracts be honoured wherever possible. He did not like people who welched on deals. He thought that Mr Harris was doing the dirty on Littlewoods (Harris was hoping to go off to work for Great Universal Stores, Littlewoods' main rival, in breach of a plain prohibition on him doing so).
Another phacktoid: this all kicked off with Maxim Nordenfelt, one of the biggest arms dealers of the late nineteenth century, a man who made a mint selling modern weaponry to the Colonial powers and Imperial rivals of late C19 Europe. By the time that he came to argue his case before the House of Lords, he was a pauper. It's often not a rewarding business, litigating about contracts, unless you happen to be a lawyer, that is.
One of the problems here is that the starting point remains that restrictions on competition per se are unlawful. Lawyers recall that point from their law of contract classes, but unless they are up to speed with the state of the art in the drafting of covenants and the numerous cases on the subject, they may just trot out that mantra, which becomes the bloke in pub mantra. The reality is that, although the courts pay lip service to the notion that restrictions on competition are no go, as the cases cited above show, they regularly do uphold restrictions on competition.
There are not many hairdresser cases these days, although even as great a jurist as Lennie Hoffmann was daft enough to enforce an area restraint on a young hairdresser when he was in the Court of Appeal in the 90s. You will have noticed that Lord Denning established the modern line on non-competes. One of the things about Denning was that he absolutely insisted that contracts be honoured wherever possible. He did not like people who welched on deals. He thought that Mr Harris was doing the dirty on Littlewoods (Harris was hoping to go off to work for Great Universal Stores, Littlewoods' main rival, in breach of a plain prohibition on him doing so).
Another phacktoid: this all kicked off with Maxim Nordenfelt, one of the biggest arms dealers of the late nineteenth century, a man who made a mint selling modern weaponry to the Colonial powers and Imperial rivals of late C19 Europe. By the time that he came to argue his case before the House of Lords, he was a pauper. It's often not a rewarding business, litigating about contracts, unless you happen to be a lawyer, that is.
Please ensure you do get your own qualified legal advice. I was once in a rather similar situation, with the new company talking the talk about getting involved with the legal side of things. At the end of the day, however, the new company only has to act in its own interests, and not yours. The two may start off aligned, but you have no guarantee that this will continue to be the case.
In my case I was lucky enough that another job came along in a completely different industry working for an old boss of mine - but only after weeks went by and various letters ending in the new employer getting cold feet; you don't control their legal spend or their attitude to risk.
In my case I was lucky enough that another job came along in a completely different industry working for an old boss of mine - but only after weeks went by and various letters ending in the new employer getting cold feet; you don't control their legal spend or their attitude to risk.
Breadvan72 said:
It's a type of pathology.
I would like to say fair play to you taking the time to advise people who have questions on here, I have been a long time lurker on the forum and notice you seem to spend some considerable time in your responses and sometimes it looks to me that you would be better talking to a brick wall. ( not necessilary in this thread)Hopefully I would never need your advise, but its great to see it all the same
Well, that's taken some time to read, thanks again all (particularly BV of course).
To clarify; the letter starts with a statement that they (solicitors) are acting on behalf of the new company and not me, but, if the matter persists that they should expect to be acting on my behalf also.
I have not had any direct communication with them, but at the same time the new company are very peeved at having arranged for me to have started today, want me on board and want this to go away, so they do have a great deal of interest (at the moment, of course).
Now, with regards to a plan B, I am in the fortunate position where I was actually recently offered employment in another role at yet another company. However, this would also be doing the same thing, in the same industry and potentially be considered as being in competition!
I challenged my former MD on this verbally after our very brief cowardly meeting on my last day, I asked whether working for company X would also be considered as in breach of my non-compete, the response? "Well, we would have to look into that too"
So there's two potential jobs I could start, but because this incompetent company I've had the misfortune of working for for the last 6 months are looking to make an example of me (they are well aware of the widespread dissatisfaction within the sales team) I'm completely stuck in limbo!!
Further reinforcement of my position of holding little-if-any confidential information is the fact that I never even visited the head office / factory in Portugal. This was postponed because I had a very young baby at home and subsequently got delayed, then never materialised before I'd made the decision to jump ship.
Thinking about it all just makes me angry again, I'm going to bed. Update when I get somewhere...
To clarify; the letter starts with a statement that they (solicitors) are acting on behalf of the new company and not me, but, if the matter persists that they should expect to be acting on my behalf also.
I have not had any direct communication with them, but at the same time the new company are very peeved at having arranged for me to have started today, want me on board and want this to go away, so they do have a great deal of interest (at the moment, of course).
Now, with regards to a plan B, I am in the fortunate position where I was actually recently offered employment in another role at yet another company. However, this would also be doing the same thing, in the same industry and potentially be considered as being in competition!
I challenged my former MD on this verbally after our very brief cowardly meeting on my last day, I asked whether working for company X would also be considered as in breach of my non-compete, the response? "Well, we would have to look into that too"
So there's two potential jobs I could start, but because this incompetent company I've had the misfortune of working for for the last 6 months are looking to make an example of me (they are well aware of the widespread dissatisfaction within the sales team) I'm completely stuck in limbo!!
Further reinforcement of my position of holding little-if-any confidential information is the fact that I never even visited the head office / factory in Portugal. This was postponed because I had a very young baby at home and subsequently got delayed, then never materialised before I'd made the decision to jump ship.
Thinking about it all just makes me angry again, I'm going to bed. Update when I get somewhere...
So as it stands, you don't have anyone representing you and your prospective new employer has withdrawn your job offer - albeit temporarily.
If you can't or won't pay for decent representation for yourself (or your new employer won't) then you need to be looking for a job outside the industry pretty sharpish.
Even if you get a decent lawyer for yourself and he says you are "home free" your new employer obviously doesn't think so otherwise they would be much more bullish in their stance.
Perhaps you could show your contract to the "third" employer and see if they are up for a fight.
Or look for a job outside the industry for a bit.
If you can't or won't pay for decent representation for yourself (or your new employer won't) then you need to be looking for a job outside the industry pretty sharpish.
Even if you get a decent lawyer for yourself and he says you are "home free" your new employer obviously doesn't think so otherwise they would be much more bullish in their stance.
Perhaps you could show your contract to the "third" employer and see if they are up for a fight.
Or look for a job outside the industry for a bit.
C.A.R. said:
Further reinforcement of my position of holding little-if-any confidential information is the fact that I never even visited the head office / factory in Portugal.
You've made this point several times but anything to do with- capacity and current production levels ie is there much space capacity meaning marginal pricing is more an option
- cost price and required recovery levels/margin giving an indication of flexibility in pricing
- remuneration and bonus structures giving understanding on sales force motivations
- key clients and current relationships to form a potential target list
- product weaknesses and/or fast v slow product lines
- new products and features on their way
Not all might apply but as a sales manager I'd hope you knew some or all of the above. Confidential information is not limited to the glue they use. The information above all ages when not in the company but on immediate exit is very pertinent.
Different level of job but I know one retail guy taking a year out before joining another supermarket chain because of these clauses. In my industry we simply get barred from providing services to specific clients for 12 months and it's accepted. It's really not unusual in management position.
JonV8V said:
C.A.R. said:
Further reinforcement of my position of holding little-if-any confidential information is the fact that I never even visited the head office / factory in Portugal.
You've made this point several times but anything to do with- capacity and current production levels ie is there much space capacity meaning marginal pricing is more an option
- cost price and required recovery levels/margin giving an indication of flexibility in pricing
- remuneration and bonus structures giving understanding on sales force motivations
- key clients and current relationships to form a potential target list
- product weaknesses and/or fast v slow product lines
- new products and features on their way
Not all might apply but as a sales manager I'd hope you knew some or all of the above. Confidential information is not limited to the glue they use. The information above all ages when not in the company but on immediate exit is very pertinent.
Different level of job but I know one retail guy taking a year out before joining another supermarket chain because of these clauses. In my industry we simply get barred from providing services to specific clients for 12 months and it's accepted. It's really not unusual in management position.
A good B2B salesperson has the skill set to sell things from one business to the next.
Why would a door manufacturer want to hire a salesperson who has worked for another door manufacturer? Why would you want to work for another door manufacturer as oppose to working selling *anything* else?
Clearly, you've built up knowledge of manufacturing, products, and the market from being in those jobs in your career. That is why you've got the job at the new door manufacturer and they've not employed one of the 99.99% of B2B salespeople who don't sell doors.
If that is clearly the case, then it is simply illogical to argue that in say a ten year career you know everything you know from the first 9 1/2 years, and picked up nothing the last 6 months.
There is a line, often difficult to draw, between what an employee carries in his or her head as part of his or her stock in trade, acquired over time spent working in a particular type of work, and information that is proprietary to the employer. The latter class of information cannot be used after employment even if it can be carried away in the employee's head and without copying of records.
A sales person may, in even a short period of work, gain knowledge of information about a business that is not simply generic business info, and is info which a competitor would find valuable, even if the info has a shelf life. The employee may intend to act honourably, and the new employer may also not wish to grab the info, but because it can be hard to distinguish between info that is lawfully usable and that which is not, and because policing promises to keep secrets is hard, restrictive covenants sometimes apply to protect the confidential info.
BTW, OP, did you take any business records with you? I hope not. Bear in mind that if you made any copies or downloads, screen grabs etc, the employer will usually find out. Customer databases are often populated with false customers, to detect copying, and there are other and more sophisticated ways of detecting information theft. I am not saying that is you, OP, but it does happen (a lot).
A sales person may, in even a short period of work, gain knowledge of information about a business that is not simply generic business info, and is info which a competitor would find valuable, even if the info has a shelf life. The employee may intend to act honourably, and the new employer may also not wish to grab the info, but because it can be hard to distinguish between info that is lawfully usable and that which is not, and because policing promises to keep secrets is hard, restrictive covenants sometimes apply to protect the confidential info.
BTW, OP, did you take any business records with you? I hope not. Bear in mind that if you made any copies or downloads, screen grabs etc, the employer will usually find out. Customer databases are often populated with false customers, to detect copying, and there are other and more sophisticated ways of detecting information theft. I am not saying that is you, OP, but it does happen (a lot).
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