Contract stating can’t work for another local firm
Discussion
Hopefully a quick one.
It states in a friends contract that they can’t work for another firm within 10 miles (accountancy) for 12 months after leaving current firm.
My research suggests that this is something the boss puts into the contract to scare them off leaving for another firm rather than it being enforceable.
From what I can tell firstly it is a restriction of trade which most judges would be reluctant to rule against in court and that also the previous owner would have to prove they are at financial detriment to my friend leaving. (I.e. taking clients with them, and even then they’d have to prove solicitation). They have no intention of taking clients with them they just want to leave.
Anyone have any experience with this sort of thing?
It states in a friends contract that they can’t work for another firm within 10 miles (accountancy) for 12 months after leaving current firm.
My research suggests that this is something the boss puts into the contract to scare them off leaving for another firm rather than it being enforceable.
From what I can tell firstly it is a restriction of trade which most judges would be reluctant to rule against in court and that also the previous owner would have to prove they are at financial detriment to my friend leaving. (I.e. taking clients with them, and even then they’d have to prove solicitation). They have no intention of taking clients with them they just want to leave.
Anyone have any experience with this sort of thing?
In very general terms, and IANAL, the enforceability of these type of restrictions hang on whether they are reasonable and the more specific they are, the more likely they are to be enforced by a court - should the employer choose to enforce them.
On the face of it, this one does look to meet the tests. It's limited by specific profession - Accountancy Firms, distance - 10 miles doesn't sound unreasonable, and time - 12 months would not normally be considered excessive.
A restriction on trade would be preventing someone from practising as an Accountant anywhere, which is clearly not the case here.
Having done some work for a few Accountancy firms, I know people tend to move around firms particularly earlier on in their career and there can be some reticence because there's often substantial training involved. Equally I've seen people take a step up at a new firm and return to the previous one better trained and experienced a couple of years later - that's just how it is.
The time to negotiate these things is before you sign the contract, but it may be worth having a conversation and requesting the clause is replaced by a non-compete or non-dealing clause. The former would prevent the employee from approaching previous clients they have dealt with and soliciting them to move their business; the later would prevent them from dealing with any previous client at all. Either of these should be time limited, 12 months seems fair enough.
On the face of it, this one does look to meet the tests. It's limited by specific profession - Accountancy Firms, distance - 10 miles doesn't sound unreasonable, and time - 12 months would not normally be considered excessive.
A restriction on trade would be preventing someone from practising as an Accountant anywhere, which is clearly not the case here.
Having done some work for a few Accountancy firms, I know people tend to move around firms particularly earlier on in their career and there can be some reticence because there's often substantial training involved. Equally I've seen people take a step up at a new firm and return to the previous one better trained and experienced a couple of years later - that's just how it is.
The time to negotiate these things is before you sign the contract, but it may be worth having a conversation and requesting the clause is replaced by a non-compete or non-dealing clause. The former would prevent the employee from approaching previous clients they have dealt with and soliciting them to move their business; the later would prevent them from dealing with any previous client at all. Either of these should be time limited, 12 months seems fair enough.
NuckyThompson said:
Hopefully a quick one.
It states in a friends contract that they can’t work for another firm within 10 miles (accountancy) for 12 months after leaving current firm.
My research suggests that this is something the boss puts into the contract to scare them off leaving for another firm rather than it being enforceable.
From what I can tell firstly it is a restriction of trade which most judges would be reluctant to rule against in court and that also the previous owner would have to prove they are at financial detriment to my friend leaving. (I.e. taking clients with them, and even then they’d have to prove solicitation). They have no intention of taking clients with them they just want to leave.
Anyone have any experience with this sort of thing?
I think it's more likely that the boss doesn't want him stealing clients. It's not unknown for unscrupulous staff to contact clients of their former employer, knowing exactly how much their being charged by their current firm, and lowballing. In fact I think there's something in the ACCA Code of Ethics which stops members from doing that (but it's a while since I looked at it) It states in a friends contract that they can’t work for another firm within 10 miles (accountancy) for 12 months after leaving current firm.
My research suggests that this is something the boss puts into the contract to scare them off leaving for another firm rather than it being enforceable.
From what I can tell firstly it is a restriction of trade which most judges would be reluctant to rule against in court and that also the previous owner would have to prove they are at financial detriment to my friend leaving. (I.e. taking clients with them, and even then they’d have to prove solicitation). They have no intention of taking clients with them they just want to leave.
Anyone have any experience with this sort of thing?
quinny100 said:
In very general terms, and IANAL, the enforceability of these type of restrictions hang on whether they are reasonable and the more specific they are, the more likely they are to be enforced by a court - should the employer choose to enforce them.
On the face of it, this one does look to meet the tests. It's limited by specific profession - Accountancy Firms, distance - 10 miles doesn't sound unreasonable, and time - 12 months would not normally be considered excessive.
A restriction on trade would be preventing someone from practising as an Accountant anywhere, which is clearly not the case here.
Having done some work for a few Accountancy firms, I know people tend to move around firms particularly earlier on in their career and there can be some reticence because there's often substantial training involved. Equally I've seen people take a step up at a new firm and return to the previous one better trained and experienced a couple of years later - that's just how it is.
The time to negotiate these things is before you sign the contract, but it may be worth having a conversation and requesting the clause is replaced by a non-compete or non-dealing clause. The former would prevent the employee from approaching previous clients they have dealt with and soliciting them to move their business; the later would prevent them from dealing with any previous client at all. Either of these should be time limited, 12 months seems fair enough.
There does not seem to be a lot of moving between firms where we live as it’s not hot a massive population so jobs come up few and far between plus the salary is generally very similar so you’d only move t o work closer to home or better working conditions. This is the reason they signed the contract partly as you haven’t got much choice if you want to work locally if a job comes up. On the face of it, this one does look to meet the tests. It's limited by specific profession - Accountancy Firms, distance - 10 miles doesn't sound unreasonable, and time - 12 months would not normally be considered excessive.
A restriction on trade would be preventing someone from practising as an Accountant anywhere, which is clearly not the case here.
Having done some work for a few Accountancy firms, I know people tend to move around firms particularly earlier on in their career and there can be some reticence because there's often substantial training involved. Equally I've seen people take a step up at a new firm and return to the previous one better trained and experienced a couple of years later - that's just how it is.
The time to negotiate these things is before you sign the contract, but it may be worth having a conversation and requesting the clause is replaced by a non-compete or non-dealing clause. The former would prevent the employee from approaching previous clients they have dealt with and soliciting them to move their business; the later would prevent them from dealing with any previous client at all. Either of these should be time limited, 12 months seems fair enough.
They have no intention of taking clients with them as the new firm doesn’t want them too, and they have very little FaceTime with clients to do so anyway.
The current employer isn’t known to be amazingly reasonable though, but perhaps best to state when handing in their notice that they have no intention of taking clients with them and will agree to non solicitation for a period of time and thank the employer for their employment but they are leaving for flexibility to family life rather than anything else?
I’d also guess that if the employer did want to take it further I.e. court that would be inherently expensive and time consuming for all concerned especially given that the will be a Covid back log in courts and ‘a reasonable time with no financial loss to the employer’ will have occurred by then
IANAL, but I would have thought that in order to obtain an injunction - which is the method for an employer to enforce a post-termination restriction - they would have to demonstrate that the breach is injurious to their business.
If your friend went and worked for another firm within 10 miles and never spoke to any of the original employers clients, I don't believe that a judge would grant an injunction to prevent their continued employment.
In my view a 12 month non-dealing agreement provides greater protection to the employer client base in any event - accountancy is not necessarily something that clients would only source very locally.
I would raise it with the employer upon resignation - I think their reaction will judge whether the clause is there to prevent the free movement of labour or genuinely protect their client base. It may be a clause in their standard contract of employment that may not be entirely relevant to every role.
If your friend went and worked for another firm within 10 miles and never spoke to any of the original employers clients, I don't believe that a judge would grant an injunction to prevent their continued employment.
In my view a 12 month non-dealing agreement provides greater protection to the employer client base in any event - accountancy is not necessarily something that clients would only source very locally.
I would raise it with the employer upon resignation - I think their reaction will judge whether the clause is there to prevent the free movement of labour or genuinely protect their client base. It may be a clause in their standard contract of employment that may not be entirely relevant to every role.
Thanks very much,
We generally expect that the clause is there to stop The staff leaving rather than protecting the client base. The client base is very well protected as the staff have very little interaction with the clients, this would make it very difficult for them to confidentially set up on their own for example.
My friend is pretty set on leaving anyway just more concerned that the former employer is going to be awkward or disruptive rather than being too worried about them really trying to enforce the contract in a court of law
We generally expect that the clause is there to stop The staff leaving rather than protecting the client base. The client base is very well protected as the staff have very little interaction with the clients, this would make it very difficult for them to confidentially set up on their own for example.
My friend is pretty set on leaving anyway just more concerned that the former employer is going to be awkward or disruptive rather than being too worried about them really trying to enforce the contract in a court of law
There have been numerous post on this topic back in the day when BV72 was still posting on the subject. The upshot was usually that these clauses should not be treated lightly, especially with a vindictive former employer.
At the very least your friend should make his prospective employer aware of any such clauses as they may take a view on whether or not to hire him.
At the very least your friend should make his prospective employer aware of any such clauses as they may take a view on whether or not to hire him.
Mr Pointy said:
There have been numerous post on this topic back in the day when BV72 was still posting on the subject. The upshot was usually that these clauses should not be treated lightly, especially with a vindictive former employer.
At the very least your friend should make his prospective employer aware of any such clauses as they may take a view on whether or not to hire him.
Prospective employer knows. They’re friends so it’s not a big deal. At the very least your friend should make his prospective employer aware of any such clauses as they may take a view on whether or not to hire him.
They’re more concerned about the hassle of it all really if the old employer did want to take it further. But like mentioned before they’ve no intention of taking clients with them and the new employer doesn’t want any either as their books are beyond capacity. Which is the reason they need my friend.
Countdown said:
I think it's more likely that the boss doesn't want him stealing clients. It's not unknown for unscrupulous staff to contact clients of their former employer, knowing exactly how much their being charged by their current firm, and lowballing. In fact I think there's something in the ACCA Code of Ethics which stops members from doing that (but it's a while since I looked at it)
Wouldn't that be handled under a simple 12 month non compete wording. The distance thing sounds a bit odd, not sure if that is something unique to accountacy. It would not work in insurance as most of the specialist underwriters surround Lloyds of London. If you take the Walky Talky, you could change companies but still be in the same building but just a different floor.
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