Restrictions on working for the competition...
Discussion
If an employer places a restriction on an employee via their employee contract that for 12 months they can't work for a competitor within a 25 mile radius is this enforceable in law? There are no trade secrets at work, just an issue with competitors paying more and poaching staff hence this being drafted into my friends contract and he wants to know if he did leave and go to a competitor (who are around 10 miles away) if his existing employer could use the above clause to prevent this? It sounds like it would not be enforceable as it's preventing the employee in progressing their career and income but i'd welcome your thoughts.
Thanks
Thanks
I had a similar clause in an addendum to my contract. I work in a small niche industry and have personally developed many of the processes with my engineering team. I had an effective 24 month ban working for competitors or customers.
I was put under pressure to sign, but I 'think' the contract would not stand up in court for my employment rights. I have written an email to my mum (please keep reading....) stating the reasons I believe the contract was unfair, unreasonable and that I was put under pressure to sign. This time stamps and provides written evidence of my concerns, should the scenario ever occur.
All mty experience is in this industry so my employment future is seriously limited by this clause in the contract. What happens if my employer decides I am no longer needed? Am I out of work for two years? Who will stump up my wages for the two years if I cannot gain employment because of this contract? A complete nonsense, if you ask me....
Original thread http://www.pistonheads.com/gassing/topic.asp?h=0&a...
Someone I knew (legal department at Rolls Royce) suggested writing the email....
Mike
I was put under pressure to sign, but I 'think' the contract would not stand up in court for my employment rights. I have written an email to my mum (please keep reading....) stating the reasons I believe the contract was unfair, unreasonable and that I was put under pressure to sign. This time stamps and provides written evidence of my concerns, should the scenario ever occur.
All mty experience is in this industry so my employment future is seriously limited by this clause in the contract. What happens if my employer decides I am no longer needed? Am I out of work for two years? Who will stump up my wages for the two years if I cannot gain employment because of this contract? A complete nonsense, if you ask me....
Original thread http://www.pistonheads.com/gassing/topic.asp?h=0&a...
Someone I knew (legal department at Rolls Royce) suggested writing the email....
Mike
A few years ago, an employer of mine, wanted to change my T&C's (along with the other 300 UK staff) to bring them into line with the US parent company.
There were 2 clauses which concerned me.
One, that they wanted to dump any vicarious liability and if I made a mistake, which cost them money they wanted me to pay for it.
And the other was that I couldn't work for a competitor, for 5 years after leaving them.
My union legal department told me that if I wanted to sign it, it wasn't worth the paper it was printed on.
You can not give or sell rights enshrined in employment law.
Given that we supplied hydraulics to JCB, a mistake could cost Millions.
I chose to refuse to sign it, and that year I didn't get a bonus.
I have no problems with NDA's though
There were 2 clauses which concerned me.
One, that they wanted to dump any vicarious liability and if I made a mistake, which cost them money they wanted me to pay for it.
And the other was that I couldn't work for a competitor, for 5 years after leaving them.
My union legal department told me that if I wanted to sign it, it wasn't worth the paper it was printed on.
You can not give or sell rights enshrined in employment law.
Given that we supplied hydraulics to JCB, a mistake could cost Millions.
I chose to refuse to sign it, and that year I didn't get a bonus.
I have no problems with NDA's though
Post term restrictive covenants are enforceable if reasonable, relevant and proportionate. Whilst is is a restraint of trade, courts will enforce if it's necessary to protect the legitimate interests of the employer.
The courts will balance the former employee’s right to trade and earn a living with the former employer’s right to protect its interests, while taking into account that the contract was entered into freely.
If everyone from receptionist to MD has the same clause then often these will not be enforceable (relatively recent case law had a senior employee who had signed a contract with a non-compete years ago when junior rejected)
Lots more details, but the above is a summary
The courts will balance the former employee’s right to trade and earn a living with the former employer’s right to protect its interests, while taking into account that the contract was entered into freely.
If everyone from receptionist to MD has the same clause then often these will not be enforceable (relatively recent case law had a senior employee who had signed a contract with a non-compete years ago when junior rejected)
Lots more details, but the above is a summary
Breadvan72 said:
A commendably accurate summary, and a refreshing change from the usual bloke in pub nonsense that turns up on restrictive covenant threads in here.
Seconded, yes thanks, this is a very interesting thread indeed, nice one folks!!May I be so bold as to ask two questions?
A. what happens if during contract renewal negotiations you receive your contract through the post to sign, having done so and returned it you then receive two further amendments to said contract [note "there are plenty of people who want your job"] that you are told to sign [see previous].
How does these contract/amendments stand in law?
B. Say you decide to review just what the company think they have you signed up for, only to discover that they do not hold a copy of your renewal contract [I've tried for some 6 months now, HR cannot find the renewed contract] what leverage would this give you in arbitration [if it came to that]??
Apologies for the slight thread hijack, but it seemed to be a pretty sound thread to ask a question, if you know what I mean.
PS I work for in a sector of the UK arm of a giant multinational that has it's fingers in just about everybodies pies!!
If you do not sign an amended contract but carry on working after the proposed amended terms have been notified to you, there will be an argument that you have agreed the amendments by conduct.
If a company wished to enforce a contract but had lost its copy of it, it could still give evidence that the contract existed, but would face difficulty if the employee denied that the contract, or the particular term asserted, had been agreed.
If a company wished to enforce a contract but had lost its copy of it, it could still give evidence that the contract existed, but would face difficulty if the employee denied that the contract, or the particular term asserted, had been agreed.
Edited by anonymous-user on Sunday 8th December 09:54
batmanreturns said:
If an employer places a restriction on an employee via their employee contract that for 12 months they can't work for a competitor within a 25 mile radius is this enforceable in law? There are no trade secrets at work, just an issue with competitors paying more and poaching staff hence this being drafted into my friends contract and he wants to know if he did leave and go to a competitor (who are around 10 miles away) if his existing employer could use the above clause to prevent this? It sounds like it would not be enforceable as it's preventing the employee in progressing their career and income but I'd welcome your thoughts.
Thanks
To give a view on this clause, we need to know the type of business and what the employee is employed to do. Area restraints are relatively rare these days, but can in some cases be justified on the basis of customer connection in the sort of business where customers tend to follow individuals. Thanks
If the sole basis for the clause is said to be to preclude poaching of staff. An employer has an interest in a stable workforce and can restrain its employees from recruiting one another to work for a rival (if the restraint is reasonable), but an area restrain would not usually be upheld on the basis of protecting a stable workforce. I suspect that the clause is in fact intended to protect customer connections.
Whether the contract clause is ultimately enforceable isn't necessarily the most important factor to consider, what is important is whether the employee has the courage to hold out, and the funds to pay for legal representation. It's an expensive game to play, the former employer usually has deeper pockets, and the consequences of losing can be considerable.
Mojocvh said:
Seconded, yes thanks, this is a very interesting thread indeed, nice one folks!!
May I be so bold as to ask two questions?
A. what happens if during contract renewal negotiations you receive your contract through the post to sign, having done so and returned it you then receive two further amendments to said contract [note "there are plenty of people who want your job"] that you are told to sign [see previous].
How does these contract/amendments stand in law?
B. Say you decide to review just what the company think they have you signed up for, only to discover that they do not hold a copy of your renewal contract [I've tried for some 6 months now, HR cannot find the renewed contract] what leverage would this give you in arbitration [if it came to that]??
Apologies for the slight thread hijack, but it seemed to be a pretty sound thread to ask a question, if you know what I mean.
PS I work for in a sector of the UK arm of a giant multinational that has it's fingers in just about everybodies pies!!
Additionally with regard to enforcement the breadth of restriction is also important. Given your employer does just about everything, if the clause restricts you from competing with them in any area they are involved in (and is not limited to your specific areas within a reasonable time frame) then that will have a major negative impact on their ability to enforce. May I be so bold as to ask two questions?
A. what happens if during contract renewal negotiations you receive your contract through the post to sign, having done so and returned it you then receive two further amendments to said contract [note "there are plenty of people who want your job"] that you are told to sign [see previous].
How does these contract/amendments stand in law?
B. Say you decide to review just what the company think they have you signed up for, only to discover that they do not hold a copy of your renewal contract [I've tried for some 6 months now, HR cannot find the renewed contract] what leverage would this give you in arbitration [if it came to that]??
Apologies for the slight thread hijack, but it seemed to be a pretty sound thread to ask a question, if you know what I mean.
PS I work for in a sector of the UK arm of a giant multinational that has it's fingers in just about everybodies pies!!
A friend had a contract with a clause like this, which prevented competition with anything the company or associated companies did, this covered basically everything apart from the priesthood
. Not that likely to be enforced...wsurfa said:
Post term restrictive covenants are enforceable if reasonable, relevant and proportionate. Whilst is is a restraint of trade, courts will enforce if it's necessary to protect the legitimate interests of the employer.
The courts will balance the former employee’s right to trade and earn a living with the former employer’s right to protect its interests, while taking into account that the contract was entered into freely.
If everyone from receptionist to MD has the same clause then often these will not be enforceable (relatively recent case law had a senior employee who had signed a contract with a non-compete years ago when junior rejected)
Lots more details, but the above is a summary
I would just add that in recent years the Courts have been leaning more towards protecting an employees right earn a living so enforcing restrictions is generally getting more difficult.The courts will balance the former employee’s right to trade and earn a living with the former employer’s right to protect its interests, while taking into account that the contract was entered into freely.
If everyone from receptionist to MD has the same clause then often these will not be enforceable (relatively recent case law had a senior employee who had signed a contract with a non-compete years ago when junior rejected)
Lots more details, but the above is a summary
That has not been my experience, doing several restrictive covenant cases a year. The problem is that the court still applies a low threshold of arguability at the interim injunction stage, and the balance of relative unfairness in granting or refusing an interim order is usually decided in favour of the employer. The court often orders a speedy trial, but that places huge resource demands on both parties, and most cases settle, more often than not on terms that favour the employer.
Breadvan72 said:
That has not been my experience, doing several restrictive covenant cases a year. The problem is that the court still applies a low threshold of arguability at the interim injunction stage, and the balance of relative unfairness in granting or refusing an interim order is usually decided in favour of the employer. The court often orders a speedy trial, but that places huge resource demands on both parties, and most cases settle, more often than not on terms that favour the employer.
In my recrutment business we placed Solicitors and other lawyers. When I started back in the 80's a multi office law firm might put a restriction on a lawyer working for a competitor within 30 miles of any of their offices. Nowdays it would probably be 2 - 3 miles of the office where the lawyer was actually based. Seems fair and reasonable to me. I wonder if I am going back further in time than you?I have been doing these cases since the late 80s, and would say that over time it has become easier to enforce covenants, but that is partly because of greater refinement in the drafting of them, and on average they are probably narrower than they were 25 years ago.
The current hot topics concern team moves and the extent to which an employee owes a duty to inform the employer of a competitive threat, or even to dob himself in. There's also some focus on deferred remuneration and other financial ties ins as disguised restraints of trade.
The current hot topics concern team moves and the extent to which an employee owes a duty to inform the employer of a competitive threat, or even to dob himself in. There's also some focus on deferred remuneration and other financial ties ins as disguised restraints of trade.
Edited by anonymous-user on Monday 9th December 17:16
wsurfa said:
Additionally with regard to enforcement the breadth of restriction is also important. Given your employer does just about everything, if the clause restricts you from competing with them in any area they are involved in (and is not limited to your specific areas within a reasonable time frame) then that will have a major negative impact on their ability to enforce.
A friend had a contract with a clause like this, which prevented competition with anything the company or associated companies did, this covered basically everything apart from the priesthood . Not that likely to be enforced...
This is exactly the position I'm in. Our company was bought out a few months ago, and we have now been given new contracts to sign. There is a clause in there that prohibits us from working for any competitor that has similar business to anything our new company has been involved in - or even shown interest in - for 12 months after termination of employment. And there is no distance limit - it appears to apply globally!A friend had a contract with a clause like this, which prevented competition with anything the company or associated companies did, this covered basically everything apart from the priesthood
. Not that likely to be enforced...What / how does one object to stuff like this? Given the two alternatives of : Sign / lose my job - I obviously take option 1, but I think most of us (at least, those of us who've noticed it) are not happy about it.
I'm also not happy about the single additional sheet we are supposed to sign that says I "do not want my average working week limited to 48 hours". Er - I do actually!
davek_964 said:
This is exactly the position I'm in. Our company was bought out a few months ago, and we have now been given new contracts to sign. There is a clause in there that prohibits us from working for any competitor that has similar business to anything our new company has been involved in - or even shown interest in - for 12 months after termination of employment. And there is no distance limit - it appears to apply globally!
What / how does one object to stuff like this? Given the two alternatives of : Sign / lose my job - I obviously take option 1, but I think most of us (at least, those of us who've noticed it) are not happy about it.
I'm also not happy about the single additional sheet we are supposed to sign that says I "do not want my average working week limited to 48 hours". Er - I do actually!
1.) Post term restrictive covenant - if it's being applied to everyone(at all levels) and is as broad as you say it is (without seeing it I can't really comment) and doesn't not relate to your specific involvement, then there is a high probability it would fail to meet the reasonableness test - so would likely be hard to enforce.What / how does one object to stuff like this? Given the two alternatives of : Sign / lose my job - I obviously take option 1, but I think most of us (at least, those of us who've noticed it) are not happy about it.
I'm also not happy about the single additional sheet we are supposed to sign that says I "do not want my average working week limited to 48 hours". Er - I do actually!
2.) Including WTD opt-out in contracts is fairly common as it is unlikely to be negotiated by most, the employee could argue in a later dispute that there was no informed choice. However it is fairly hard to exceed this as you need to exceed 48hrs on average over 17 weeks (and breaks and holiday don't count).
If your former employer decides to enforce a non-compete clause you have two options, either ignore the threat of court action and hope they're bluffing, or engage your own solicitor and enter into correspondence. If you choose the second option it will cost upwards of £250 + VAT per hour for letters and advice, and a monthly bill of several thousand pounds is very easy to accrue. The last one I got involved in cost me £30k before even reaching court, and if you end up going to court and lose then the financial consequences can be severe.
Typically, the employer can afford the costs but the employee can't (and most can't afford to lose), which of course is partly why employers include such restrictions even if they don't believe them to be enforceable, and why employees don't fight it even if their mates down the pub tell them they can't lose.
You really, really don't want to get involved in a legal dispute, especially with a large company, it's very expensive and leads to a lot of sleepless nights.
Typically, the employer can afford the costs but the employee can't (and most can't afford to lose), which of course is partly why employers include such restrictions even if they don't believe them to be enforceable, and why employees don't fight it even if their mates down the pub tell them they can't lose.
You really, really don't want to get involved in a legal dispute, especially with a large company, it's very expensive and leads to a lot of sleepless nights.
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