Non-compete clauses in employment contract
Discussion
I am a management consultant. I've worked for one of the big companies and a couple of smaller ones. The company I work for is not in great shape as a result of the virus. As a consequence I may get made redundant and the company's existence may be in question.
Let's assume that if I get canned it carries on in its private ownership for a few more months, probably hobbling along.
Scenario:
I get binned by them.
I am leading a project with a client that my employer nurtured and I then sold to - we have a reasonably large team on the job.
I've worked with the client before under the employment of a different company (so have existing relationships there).
The client loves us and wants to buy more of what we do.
All of us who do what we do are probably about to be binned together and what is left of my employer won't be able to do what the current team does.
My contract of employment has got the usual non-compete clauses:
14. POST-EMPLOYMENT OBLIGATIONS
14.1. For a period of one year after the termination of your employment you shall not, without prior
consent in writing from the Company, engage in the following, whether directly or indirectly and whether on your own behalf or on behalf of any other business concern, persons, partnership, firm, company or other body that is wholly or partly in competition with the business carried on by the Company:
14.2. Canvass, solicit or approach or cause to be canvassed or solicited or approached about any services, in respect of the provision of which you were engaged during the last year of your employment, any person or persons who at the date of the termination of your employment was negotiating with the Company for the supply of the Company’s services or any person or persons who within two years prior to the termination of your employment is or was a client of the Company or was in the habit of dealing with the company and with whom you had personal dealings in the course of your employment.
14.3. Solicit or entice or endeavour to solicit or entice away from the Company any person employed in an executive, technical or sales capacity at the date of such termination.
14.4. Deal with any person or persons who at any time during the period of one year prior to termination of your employment hereunder have been in the habit of dealing under contract with the Company and with whom you had personal dealings in the course of your employment during the said period.
14.5. You and the Company agree that the covenants set out in this clause 14 are separate and severable and enforceable. Accordingly and whilst the restrictions are considered by you and the Company to be reasonable in all the circumstances as at the date hereof it is acknowledged that restrictions of such a nature may be invalid because of changing circumstances or other unforeseen reasons and therefore if any of the restrictions shall be adjudged to be void or ineffective for whatever reason but would be adjudged to be valid and effective if part of the wording of the restrictions were deleted or the periods of the restrictions reduced, they shall apply with such modifications as may be necessary to make them valid and effective.
14.6. After termination of your employment you shall not without the written consent of the Company (either personally or through an agent and whether for yourself or on behalf of others):
14.7. represent yourself as being connected with or successor to the Company or as acting on behalf of the Company.
14.8. carry on or cause any business to be carried on under or using any name, style, logo or image from time to time used by the Company or which is a name style, logo or image in the opinion of the Company calculated to cause confusion between the one used by the Company.
Question for any employment lawyers - how might clause 14.5 apply with regard to changing circumstances? Are there any precedents out there? What should I look out for/be aware of if I want to explore competing in order to maintain some income and continue a great relationship with the current client?
Sorry for the long-winded post but hope it's reasonably clear.
Let's assume that if I get canned it carries on in its private ownership for a few more months, probably hobbling along.
Scenario:
I get binned by them.
I am leading a project with a client that my employer nurtured and I then sold to - we have a reasonably large team on the job.
I've worked with the client before under the employment of a different company (so have existing relationships there).
The client loves us and wants to buy more of what we do.
All of us who do what we do are probably about to be binned together and what is left of my employer won't be able to do what the current team does.
My contract of employment has got the usual non-compete clauses:
14. POST-EMPLOYMENT OBLIGATIONS
14.1. For a period of one year after the termination of your employment you shall not, without prior
consent in writing from the Company, engage in the following, whether directly or indirectly and whether on your own behalf or on behalf of any other business concern, persons, partnership, firm, company or other body that is wholly or partly in competition with the business carried on by the Company:
14.2. Canvass, solicit or approach or cause to be canvassed or solicited or approached about any services, in respect of the provision of which you were engaged during the last year of your employment, any person or persons who at the date of the termination of your employment was negotiating with the Company for the supply of the Company’s services or any person or persons who within two years prior to the termination of your employment is or was a client of the Company or was in the habit of dealing with the company and with whom you had personal dealings in the course of your employment.
14.3. Solicit or entice or endeavour to solicit or entice away from the Company any person employed in an executive, technical or sales capacity at the date of such termination.
14.4. Deal with any person or persons who at any time during the period of one year prior to termination of your employment hereunder have been in the habit of dealing under contract with the Company and with whom you had personal dealings in the course of your employment during the said period.
14.5. You and the Company agree that the covenants set out in this clause 14 are separate and severable and enforceable. Accordingly and whilst the restrictions are considered by you and the Company to be reasonable in all the circumstances as at the date hereof it is acknowledged that restrictions of such a nature may be invalid because of changing circumstances or other unforeseen reasons and therefore if any of the restrictions shall be adjudged to be void or ineffective for whatever reason but would be adjudged to be valid and effective if part of the wording of the restrictions were deleted or the periods of the restrictions reduced, they shall apply with such modifications as may be necessary to make them valid and effective.
14.6. After termination of your employment you shall not without the written consent of the Company (either personally or through an agent and whether for yourself or on behalf of others):
14.7. represent yourself as being connected with or successor to the Company or as acting on behalf of the Company.
14.8. carry on or cause any business to be carried on under or using any name, style, logo or image from time to time used by the Company or which is a name style, logo or image in the opinion of the Company calculated to cause confusion between the one used by the Company.
Question for any employment lawyers - how might clause 14.5 apply with regard to changing circumstances? Are there any precedents out there? What should I look out for/be aware of if I want to explore competing in order to maintain some income and continue a great relationship with the current client?
Sorry for the long-winded post but hope it's reasonably clear.
IANAL
But, I thought these clauses were pretty much unenforceable as they impacted on your right to work.
My brother works in a commercial environment had similar a clause in his contract, when he changed jobs he sent a courtesy email to his clients to say he was leaving, but no more. Obviously people are much easier to track with social media nowadays...
But, I thought these clauses were pretty much unenforceable as they impacted on your right to work.
My brother works in a commercial environment had similar a clause in his contract, when he changed jobs he sent a courtesy email to his clients to say he was leaving, but no more. Obviously people are much easier to track with social media nowadays...
CubanPete said:
IANAL
But, I thought these clauses were pretty much unenforceable as they impacted on your right to work.
My brother works in a commercial environment had similar a clause in his contract, when he changed jobs he sent a courtesy email to his clients to say he was leaving, but no more. Obviously people are much easier to track with social media nowadays...
They are enforceable. Well, putting it differently there is plenty of law that says non-compete clauses can be enforced.But, I thought these clauses were pretty much unenforceable as they impacted on your right to work.
My brother works in a commercial environment had similar a clause in his contract, when he changed jobs he sent a courtesy email to his clients to say he was leaving, but no more. Obviously people are much easier to track with social media nowadays...
Secondly, the paragraph you are referring to is a severability clause (unless I just read the wrong clause but when I hit reply I can't see it anymore) - this means that in the event that it went to court and they said clause 14.2 was not valid (for example) that does not mean that 14.1, 14.3, 14.4 etc were not....
Oh for completeness IAAL but IANYL
Jasandjules said:
They are enforceable. Well, putting it differently there is plenty of law that says non-compete clauses can be enforced.
Secondly, the paragraph you are referring to is a severability clause (unless I just read the wrong clause but when I hit reply I can't see it anymore) - this means that in the event that it went to court and they said clause 14.2 was not valid (for example) that does not mean that 14.1, 14.3, 14.4 etc were not....
Oh for completeness IAAL but IANYL
Thanks JasandJules. I get that YANML and in my consulting roles I have instructed enough lawyers over the last 15 years (half the Magic Circle and a big chunk of the Silver Circle) to know that I am just waving a stick in the air here but appreciate the reply. For me it's the vagueness of 14.2 that is encouraging. Can you point me in the direction of some resources that I can read about the enforceability - perhaps success/failure results for employers in trying to sue previous employees?Secondly, the paragraph you are referring to is a severability clause (unless I just read the wrong clause but when I hit reply I can't see it anymore) - this means that in the event that it went to court and they said clause 14.2 was not valid (for example) that does not mean that 14.1, 14.3, 14.4 etc were not....
Oh for completeness IAAL but IANYL
IINAL - however, in the event of your redundancy, the simplest thing would be to ask them to waive the non-compete in writing, so that you can earn a living.
Companies are made up of people, and people are likely to be sympathetic to your situation - if nothing else, it can’t hurt to ask?
Companies are made up of people, and people are likely to be sympathetic to your situation - if nothing else, it can’t hurt to ask?
DanL said:
IINAL - however, in the event of your redundancy, the simplest thing would be to ask them to waive the non-compete in writing, so that you can earn a living.
Companies are made up of people, and people are likely to be sympathetic to your situation - if nothing else, it can’t hurt to ask?
Thanks DanL. Yep, ordinarily I would agree. But there is ego at play here (not mine). My default position would be the one you suggested but I don't think it will play out that way.Companies are made up of people, and people are likely to be sympathetic to your situation - if nothing else, it can’t hurt to ask?
w1bbles said:
Thanks JasandJules. I get that YANML and in my consulting roles I have instructed enough lawyers over the last 15 years (half the Magic Circle and a big chunk of the Silver Circle) to know that I am just waving a stick in the air here but appreciate the reply. For me it's the vagueness of 14.2 that is encouraging. Can you point me in the direction of some resources that I can read about the enforceability - perhaps success/failure results for employers in trying to sue previous employees?
OP, most resources that are up to date with current case law will be subscription knowledge/template databases that law firms pay thousands of pounds a year for.I'd suggest biting the bullet and invest a few hundred quid with an employment lawyer for them to review your contract as a whole (for example, aside from the covenants, might the confidentiality clause limit your ability to contacts clients) and advise you. You would not only be investing in expert advice, but advice that is backed by an insurance policy. I'm not sure a thread on PH offers that.
Europa1 said:
OP, most resources that are up to date with current case law will be subscription knowledge/template databases that law firms pay thousands of pounds a year for.
I'd suggest biting the bullet and invest a few hundred quid with an employment lawyer for them to review your contract as a whole (for example, aside from the covenants, might the confidentiality clause limit your ability to contacts clients) and advise you. You would not only be investing in expert advice, but advice that is backed by an insurance policy. I'm not sure a thread on PH offers that.
Yep - probably the best plan. I'd suggest biting the bullet and invest a few hundred quid with an employment lawyer for them to review your contract as a whole (for example, aside from the covenants, might the confidentiality clause limit your ability to contacts clients) and advise you. You would not only be investing in expert advice, but advice that is backed by an insurance policy. I'm not sure a thread on PH offers that.
w1bbles said:
Can you point me in the direction of some resources that I can read about the enforceability - perhaps success/failure results for employers in trying to sue previous employees?
It is never as simple as that. But I can say that IME most employers won't go after the employee unless there is a severe cost to their business, given the potential legal costs in doing so.... Gassing Station | Jobs & Employment Matters | Top of Page | What's New | My Stuff