Non-competition clause in employment contract?
Discussion
A close friend of mine has been offered a new job, but in the contract there is a non-competing clause that seems a little restrictive, and I'm wondering if it is actually enforceable.
In short, the clause states " you agree, thatt you shall not for a period of 12 months after the terminating of your employment work in the transport sector, whether as an employee, agent, consultant or otherwise, in a similar occupation to that which you were engaged"
My friend is specifically engaged in product and brand marketing, rather than direct sales or operations if it makes any difference.
As the transport sector is widely varied industry, could this be enforced?
In short, the clause states " you agree, thatt you shall not for a period of 12 months after the terminating of your employment work in the transport sector, whether as an employee, agent, consultant or otherwise, in a similar occupation to that which you were engaged"
My friend is specifically engaged in product and brand marketing, rather than direct sales or operations if it makes any difference.
As the transport sector is widely varied industry, could this be enforced?
Breadvan disappeared a long time ago(?)
There needs to be a business interest they're trying to protect, in this case it sounds like your friend will have material knowledge of upcoming marketing campaigns and potential special offers, what kind of discounts they get in advertising etc. which they'd rather a competitor didn't know. To a degree that's reasonable.
If he sees himself as a marketing guru that may switch sector it's not really an issue, he just has a year long issue with the transport sector. Barring a sector in this way, or a group of clients is very common in covenants for professional services.
A clause like that would be worse for a train driver as that's their skill and industry, but then it's unlikely to be enforceable as there is not the same degree of business interest that's being protected.
Some people just don't like these sorts of clauses in contracts, but that doesn't mean they're not reasonable and enforecable. It rests on a lower level of detail.
There needs to be a business interest they're trying to protect, in this case it sounds like your friend will have material knowledge of upcoming marketing campaigns and potential special offers, what kind of discounts they get in advertising etc. which they'd rather a competitor didn't know. To a degree that's reasonable.
If he sees himself as a marketing guru that may switch sector it's not really an issue, he just has a year long issue with the transport sector. Barring a sector in this way, or a group of clients is very common in covenants for professional services.
A clause like that would be worse for a train driver as that's their skill and industry, but then it's unlikely to be enforceable as there is not the same degree of business interest that's being protected.
Some people just don't like these sorts of clauses in contracts, but that doesn't mean they're not reasonable and enforecable. It rests on a lower level of detail.
The enforceability of this will depend on the precise wording, unfortunately.
The basic rule is that an employer is allowed to restrict the activities of a departing employee provided, basically, that they are doing so to protect a legitimate business interest and that the extent of the restriction is no wider than is necessary to give that protection.
Looking at the wording above, and recognising that it is probably not the actual wording of the clause, the key issue for enforceability would seem to be the use of the phrase "the transport sector". If, for example, I am paid handsomely to prepare PR material for Telsa, it would probably be justifiable and reasonable to restrict me for 12 months after leaving from going to prepare PR material for a direct competitor of Tesla. If that is correct then that is what the restrictive covenant should say. If it simply says " you cannot work in the transport sector" then that restricts me from doing all sorts of other things as well, like driving a bus or working on reception at a van dealership. That level of restricition couldn't be justified because it matters not a jot to Tesla whether I am driving a bus or working on reception. The effect of the clause is too wide
So, we need the precise wording of the restrictive covenant, please.
The basic rule is that an employer is allowed to restrict the activities of a departing employee provided, basically, that they are doing so to protect a legitimate business interest and that the extent of the restriction is no wider than is necessary to give that protection.
Looking at the wording above, and recognising that it is probably not the actual wording of the clause, the key issue for enforceability would seem to be the use of the phrase "the transport sector". If, for example, I am paid handsomely to prepare PR material for Telsa, it would probably be justifiable and reasonable to restrict me for 12 months after leaving from going to prepare PR material for a direct competitor of Tesla. If that is correct then that is what the restrictive covenant should say. If it simply says " you cannot work in the transport sector" then that restricts me from doing all sorts of other things as well, like driving a bus or working on reception at a van dealership. That level of restricition couldn't be justified because it matters not a jot to Tesla whether I am driving a bus or working on reception. The effect of the clause is too wide
So, we need the precise wording of the restrictive covenant, please.
zooky said:
The enforceability of this will depend on the precise wording, unfortunately.
The basic rule is that an employer is allowed to restrict the activities of a departing employee provided, basically, that they are doing so to protect a legitimate business interest and that the extent of the restriction is no wider than is necessary to give that protection.
Looking at the wording above, and recognising that it is probably not the actual wording of the clause, the key issue for enforceability would seem to be the use of the phrase "the transport sector". If, for example, I am paid handsomely to prepare PR material for Telsa, it would probably be justifiable and reasonable to restrict me for 12 months after leaving from going to prepare PR material for a direct competitor of Tesla. If that is correct then that is what the restrictive covenant should say. If it simply says " you cannot work in the transport sector" then that restricts me from doing all sorts of other things as well, like driving a bus or working on reception at a van dealership. That level of restricition couldn't be justified because it matters not a jot to Tesla whether I am driving a bus or working on reception. The effect of the clause is too wide
So, we need the precise wording of the restrictive covenant, please.
The paraphrased clause says in a similar capacity so it's not a blanket restriction, but I agree it's in the detail.The basic rule is that an employer is allowed to restrict the activities of a departing employee provided, basically, that they are doing so to protect a legitimate business interest and that the extent of the restriction is no wider than is necessary to give that protection.
Looking at the wording above, and recognising that it is probably not the actual wording of the clause, the key issue for enforceability would seem to be the use of the phrase "the transport sector". If, for example, I am paid handsomely to prepare PR material for Telsa, it would probably be justifiable and reasonable to restrict me for 12 months after leaving from going to prepare PR material for a direct competitor of Tesla. If that is correct then that is what the restrictive covenant should say. If it simply says " you cannot work in the transport sector" then that restricts me from doing all sorts of other things as well, like driving a bus or working on reception at a van dealership. That level of restricition couldn't be justified because it matters not a jot to Tesla whether I am driving a bus or working on reception. The effect of the clause is too wide
So, we need the precise wording of the restrictive covenant, please.
You need to also understand the role. If 'marketing' meant looking pretty on a trade stand it's not justifiable unless you were to be 'the public face of XYZ'. If it's determining the corporate marketing strategy then it probably is.
Yes, that's a good point.
A better example might have been that if I am taking a job as the PR manager of Ferrari then it is probably justifiable to prevent me from doing that job for Lamborghini for a period of 12 months after I leave. It's probably not justifiable to prevent me from being the PR manager for (let's say) Dacia, which does not in any real sense compete with Ferrari. It's unlikely that any commercially sensitive information is going to be useful to Dacia and even more unlikely that I'll be able to divert any business away from, Ferrari by using my PR skillz to convince Ferrari punters to buy a Logan MCV instead. And it won't be justifiable at all to prevent me from being the PR manager for Virgin Trains or Eddie Stobart or whoever, just because they are in "the transport sector".
A better example might have been that if I am taking a job as the PR manager of Ferrari then it is probably justifiable to prevent me from doing that job for Lamborghini for a period of 12 months after I leave. It's probably not justifiable to prevent me from being the PR manager for (let's say) Dacia, which does not in any real sense compete with Ferrari. It's unlikely that any commercially sensitive information is going to be useful to Dacia and even more unlikely that I'll be able to divert any business away from, Ferrari by using my PR skillz to convince Ferrari punters to buy a Logan MCV instead. And it won't be justifiable at all to prevent me from being the PR manager for Virgin Trains or Eddie Stobart or whoever, just because they are in "the transport sector".
Thanks all for the replies - the wording is pretty much as it was dictated to me. Currently she works within a specific sector of the industry to do with commercial property,- almost an estate agent role in essence, with the marketing of RDCs and heavy commercial workshops and sales sites, but has been offered a role working with commercial vehicle components and tooling, and this is where the we think the wording is vague and restrictive. Yes, they are still in the transport industry, but very different areas and products.
Previously she has worked in various marketing roles to do with PR, brand awareness, copy writing etc, and her knowledge is around the various influencers and contacts within the industry both suppliers, operators and the media.
I agree that she needs to show the contract to an employment lawyer to put her mind at ease, but from my limited knowledge of how judges etc would consider a "test of reasonableness", I think this would pass given the very different nature of the two employers within one wide industry sector.
Previously she has worked in various marketing roles to do with PR, brand awareness, copy writing etc, and her knowledge is around the various influencers and contacts within the industry both suppliers, operators and the media.
I agree that she needs to show the contract to an employment lawyer to put her mind at ease, but from my limited knowledge of how judges etc would consider a "test of reasonableness", I think this would pass given the very different nature of the two employers within one wide industry sector.
FWIW my own interpretation of this when it crossed my own situation is that it really only applies to existing customers to prevent a leaver stealing business. The restriction has to be balanced against the right to work, and it is inevitable that anyone with specialist skills is going to end up working in the same business. My view - unless the new role has the same existing customer base, = unenforceable
zooky said:
The enforceability of this will depend on the precise wording, unfortunately.
The basic rule is that an employer is allowed to restrict the activities of a departing employee provided, basically, that they are doing so to protect a legitimate business interest and that the extent of the restriction is no wider than is necessary to give that protection.
Looking at the wording above, and recognising that it is probably not the actual wording of the clause, the key issue for enforceability would seem to be the use of the phrase "the transport sector". If, for example, I am paid handsomely to prepare PR material for Telsa, it would probably be justifiable and reasonable to restrict me for 12 months after leaving from going to prepare PR material for a direct competitor of Tesla. If that is correct then that is what the restrictive covenant should say. If it simply says " you cannot work in the transport sector" then that restricts me from doing all sorts of other things as well, like driving a bus or working on reception at a van dealership. That level of restricition couldn't be justified because it matters not a jot to Tesla whether I am driving a bus or working on reception. The effect of the clause is too wide
So, we need the precise wording of the restrictive covenant, please.
Doesn't it also have to have the added ingredient that it cannot prevent the person from using his/her own skills and knowledge to gain employment elsewhere?The basic rule is that an employer is allowed to restrict the activities of a departing employee provided, basically, that they are doing so to protect a legitimate business interest and that the extent of the restriction is no wider than is necessary to give that protection.
Looking at the wording above, and recognising that it is probably not the actual wording of the clause, the key issue for enforceability would seem to be the use of the phrase "the transport sector". If, for example, I am paid handsomely to prepare PR material for Telsa, it would probably be justifiable and reasonable to restrict me for 12 months after leaving from going to prepare PR material for a direct competitor of Tesla. If that is correct then that is what the restrictive covenant should say. If it simply says " you cannot work in the transport sector" then that restricts me from doing all sorts of other things as well, like driving a bus or working on reception at a van dealership. That level of restricition couldn't be justified because it matters not a jot to Tesla whether I am driving a bus or working on reception. The effect of the clause is too wide
So, we need the precise wording of the restrictive covenant, please.
I don't see why the person in your example can't work for Tesla's rival. Provided they aren't using insider knowledge of Tesla's plans surely a person is entitled to use their marketing skills?
As has been pointed out, you cannot restrict someone's abilty to work in general employment but there are exceptions. For example, if you buy a company from the person that set it up, you could enforce a non-competition clause that restricts them from working for, or setting up a new business in direct compeition with you for a number of years.
If you are a business, say, a metal fastenings company for example, and you have a sales person that leaves to go work for your direct competitor. You cannot restrict them from working there but you can enforce a clause that prohibits them from approaching your customers or suppliers for a period of time.
If you are a business, say, a metal fastenings company for example, and you have a sales person that leaves to go work for your direct competitor. You cannot restrict them from working there but you can enforce a clause that prohibits them from approaching your customers or suppliers for a period of time.
zooky said:
It's unlikely that any commercially sensitive information is going to be useful to Dacia and even more unlikely that I'll be able to divert any business away from, Ferrari by using my PR skillz to convince Ferrari punters to buy a Logan MCV instead.
Not with that attitude you won't. 
We had a legal case on this topic. We were the people seeking to stop the employment as well as deal with some other issues of theft.
Barrister followed up and won the theft case. He advised us to drop the employment issue as it was to widely drawn.
The clauses need to be worded as the minimum to protect your position taking into account the industry , geography etc in a way that is defensible that working for x y z will damage you. Can't work in software etc is too wide and not enforceable.
We then listed by name the 12 or so competitors they could not work for. That would cause damage. We were advised this was enforcible.
Barrister followed up and won the theft case. He advised us to drop the employment issue as it was to widely drawn.
The clauses need to be worded as the minimum to protect your position taking into account the industry , geography etc in a way that is defensible that working for x y z will damage you. Can't work in software etc is too wide and not enforceable.
We then listed by name the 12 or so competitors they could not work for. That would cause damage. We were advised this was enforcible.
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