Job Contract Advice - setting up in competition
Discussion
Can any legal eagles tell me if this term is actually enforceable and what the likely penalty for breaking the term would likely be?
It is not terribly clear either - by area do they mean geographical area or work area...
I was freelancing in the same area before the employment in question and the employer has no problem with me continuing to do so in my own time, so long as there is no conflict of interest (stealing clients).
workcontract said:
On termination of employment, for whatever reason, employees must not set
up nor establish a business providing similar services to xxxxx within an
area likely to conflict with the provision of such services for a period
of one year. Failure to comply with this requirement may result in legal
prosecution.
The work in question is very specific, i.e. my only skillset. If I was to leave (or get sacked) then would this really prevent me from setting up on my own or is it hot air designed to put people off doing just that?up nor establish a business providing similar services to xxxxx within an
area likely to conflict with the provision of such services for a period
of one year. Failure to comply with this requirement may result in legal
prosecution.
It is not terribly clear either - by area do they mean geographical area or work area...
I was freelancing in the same area before the employment in question and the employer has no problem with me continuing to do so in my own time, so long as there is no conflict of interest (stealing clients).
It sounds unreasonable if your experience/skillset is in this particular field. Otherwise it stops you from making a living. Unreasonable!
Normally a contract could be that you cannot work with existing clients for 6 months.
It's delicate but it sounds to me that you have a legal argument against this contract but I would advise you take legal employment advice.
Chris
Managing Director
Normally a contract could be that you cannot work with existing clients for 6 months.
It's delicate but it sounds to me that you have a legal argument against this contract but I would advise you take legal employment advice.
Chris
Managing Director
This is a messy area from a legal perspective, clauses like this used to be viewed as being more enforceable than they are today due to some cases in the past few years.
Essentially to be enforceable the employer needs to be able to show that they are protecting a legitimate interest and that it is reasonable. Just stopping you from competing isn't enough, that is restraint of trade.
So it is very possible that it is unenforceable but much depends on the detail of the business.
Essentially to be enforceable the employer needs to be able to show that they are protecting a legitimate interest and that it is reasonable. Just stopping you from competing isn't enough, that is restraint of trade.
So it is very possible that it is unenforceable but much depends on the detail of the business.
Hi,
I'm a new member & lawyer (Intellectual Property- the link to employment law is in confidential information, the two go hand in hand). For obvious reasons consider this opinion, and not specific legal advice.
Most people assume this sort of clause to be a "restraint of trade" and hence unlawful, which is not true.
Such clauses are assumed lawful by a court subject to 3 cascading conditions:
1) The clause must be reasonable to protect the interests of at least one of the parties. [It depends on what your employer does but in general if they have spent time/ money building a brand, securing customers, it’s not reasonable for a staff member to simply take what they’ve learnt and start their own thing- particularly customer lists etc- hence again the link to confidential information, so this test usually passes].
2) It must be reasonable between the parties.
[Usually in terms of duration & location- most are clear, this is not. 1 year is usually bearable- many say two- geographically if nothing is specified it’s taken as “global” which is very rarely acceptable. Your employer most likely thinks they have been clever leaving it up to interpretation, sadly it’s the stupidest route to take. I doubt this was from an experienced lawyer, probably an external small-time “service provider”, rather than a firm of solicitors. Money saved then, probably not now. Writing a contract on the assumption “a court will take it like this” is pointless- lawyers live in a 65/ 35 World, when I’m perfectly, perfectly confident of winning I can only ever say I’m 65% sure- why? Because you never know what would happen in court. The same with a clear-cut loss- you’ve still got at least a 35% chance as you have no idea what will happen. A court will usually favour an employee if they have been fair, so in the absence of clarity as to the meaning of “area”, you’ve got a reasonable chance of it failing this test.]
3) The final test is a public interest one- should the clause stand because there’s an overarching public interest in it remaining. Not “the public is interestED” but things like draconian restrictions on Security Service staff’s contracts remain enforceable because of this backstop.
Suing you under this clause in isolation is probably fruitless- unless an employer can show loss there’s no “automatic” right to them getting a payment, or you being fined. Why I get involved in these is if an employee has taken their employer’s trade secrets or confidential information to help build their own new business, as is what usually happens. In that case a potential loss of trade is quantifiable, or an injunction can be granted against an individual or new firm to stop them doing something. If you don’t that’s contempt of court, which is jail time, no question (why? If you disobey a court then who else is there to tell you what to do? As the highest line of authority they'll waste no time putting you inside). That doesn't mean the pathetic veiled-threat "may result in legal prosecution" is necessarily any decision of your employer (or in any way meaningful), it's just another indication a YTS-er wrote the clause.
If you do stop what you're doing then of course if your business plan was predicated on gaining customers/ getting money in early on, this cause of action is often enough for a start-up to fold. Not nice, but who said life was fair? If it was I’d have a 599.
With regards the confidential information aspect, the law is very complex, suffice to say a chap recently left his job as a recruitment advisor to set up his own. Days before he went "as if by magic" he added all his current contacts to his social networks. "Foul" said the employer, the court agreed, a search order & injunction ruined his new business before it started. The message? Be damned careful.
Apols for length, hope this is useful!
Tim
I'm a new member & lawyer (Intellectual Property- the link to employment law is in confidential information, the two go hand in hand). For obvious reasons consider this opinion, and not specific legal advice.
Most people assume this sort of clause to be a "restraint of trade" and hence unlawful, which is not true.
Such clauses are assumed lawful by a court subject to 3 cascading conditions:
1) The clause must be reasonable to protect the interests of at least one of the parties. [It depends on what your employer does but in general if they have spent time/ money building a brand, securing customers, it’s not reasonable for a staff member to simply take what they’ve learnt and start their own thing- particularly customer lists etc- hence again the link to confidential information, so this test usually passes].
2) It must be reasonable between the parties.
[Usually in terms of duration & location- most are clear, this is not. 1 year is usually bearable- many say two- geographically if nothing is specified it’s taken as “global” which is very rarely acceptable. Your employer most likely thinks they have been clever leaving it up to interpretation, sadly it’s the stupidest route to take. I doubt this was from an experienced lawyer, probably an external small-time “service provider”, rather than a firm of solicitors. Money saved then, probably not now. Writing a contract on the assumption “a court will take it like this” is pointless- lawyers live in a 65/ 35 World, when I’m perfectly, perfectly confident of winning I can only ever say I’m 65% sure- why? Because you never know what would happen in court. The same with a clear-cut loss- you’ve still got at least a 35% chance as you have no idea what will happen. A court will usually favour an employee if they have been fair, so in the absence of clarity as to the meaning of “area”, you’ve got a reasonable chance of it failing this test.]
3) The final test is a public interest one- should the clause stand because there’s an overarching public interest in it remaining. Not “the public is interestED” but things like draconian restrictions on Security Service staff’s contracts remain enforceable because of this backstop.
Suing you under this clause in isolation is probably fruitless- unless an employer can show loss there’s no “automatic” right to them getting a payment, or you being fined. Why I get involved in these is if an employee has taken their employer’s trade secrets or confidential information to help build their own new business, as is what usually happens. In that case a potential loss of trade is quantifiable, or an injunction can be granted against an individual or new firm to stop them doing something. If you don’t that’s contempt of court, which is jail time, no question (why? If you disobey a court then who else is there to tell you what to do? As the highest line of authority they'll waste no time putting you inside). That doesn't mean the pathetic veiled-threat "may result in legal prosecution" is necessarily any decision of your employer (or in any way meaningful), it's just another indication a YTS-er wrote the clause.
If you do stop what you're doing then of course if your business plan was predicated on gaining customers/ getting money in early on, this cause of action is often enough for a start-up to fold. Not nice, but who said life was fair? If it was I’d have a 599.
With regards the confidential information aspect, the law is very complex, suffice to say a chap recently left his job as a recruitment advisor to set up his own. Days before he went "as if by magic" he added all his current contacts to his social networks. "Foul" said the employer, the court agreed, a search order & injunction ruined his new business before it started. The message? Be damned careful.
Apols for length, hope this is useful!
Tim
brother had one of those, told the new bosses to shove it where the sun did not shine and that no, he did not need a reference, they laughed when he told them it would take 2-3 people to do his job..... he was right, he over wintered in nepal and is now in thailand ? - sort of a round the world trip after selling up a few years ago
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