Employment Law: Non-Compete agreements
Discussion
Anyone with an Employment Law background here?
I'm 'bound' by a clause in my contract that restricts my joining any of my employers' competitors within 90 days of my resignation. There are a few paragraphs in the clause, so I've trimmed out the "who why whatsoever thus" blurb and posted them here, and would be eternally grateful if anyone could tell me whether it is enforceable or not. - I think it's too restrictive, and therefore unenforceable, but what do I know!
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RESTRICTIONS AFTER TERMINATION
The Employee covenants to the Company that he shall not, for three months following Termination in the Relevant Territory and in competition with the Company:
1. engage, assist or be interested in any undertaking which provides Services;
2. endeavour to entice away from the Company any Client in relation to the supply of Services;
3. be concerned with the supply of Services to any Client;
4. solicit the employment or engagement of any Key Employee in a business which is in competition with the Company.
Each of the obligations in this clause is an entire, separate and independent restriction on the Employee, despite the fact that they may be contained in the same phrase and if any part is found to be invalid or unenforceable the remainder will remain valid and enforceable. The Employee agrees (at the request of the Company) to enter into a direct agreement with any Group Company under which he will accept restrictions broadly identical to those within this provision.
If the Employee is offered employment or a consultancy arrangement with a third party at any time during his/her employment with the Company or in the three months thereafter, he/she will supply that third party with a full copy of this agreement.
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I'm 'bound' by a clause in my contract that restricts my joining any of my employers' competitors within 90 days of my resignation. There are a few paragraphs in the clause, so I've trimmed out the "who why whatsoever thus" blurb and posted them here, and would be eternally grateful if anyone could tell me whether it is enforceable or not. - I think it's too restrictive, and therefore unenforceable, but what do I know!
****************************************************
RESTRICTIONS AFTER TERMINATION
The Employee covenants to the Company that he shall not, for three months following Termination in the Relevant Territory and in competition with the Company:
1. engage, assist or be interested in any undertaking which provides Services;
2. endeavour to entice away from the Company any Client in relation to the supply of Services;
3. be concerned with the supply of Services to any Client;
4. solicit the employment or engagement of any Key Employee in a business which is in competition with the Company.
Each of the obligations in this clause is an entire, separate and independent restriction on the Employee, despite the fact that they may be contained in the same phrase and if any part is found to be invalid or unenforceable the remainder will remain valid and enforceable. The Employee agrees (at the request of the Company) to enter into a direct agreement with any Group Company under which he will accept restrictions broadly identical to those within this provision.
If the Employee is offered employment or a consultancy arrangement with a third party at any time during his/her employment with the Company or in the three months thereafter, he/she will supply that third party with a full copy of this agreement.
****************************************************
A few points:
a) Did you sign the contract as listed above?
b) Are you on gardening leave or did you resign with immediate effect?
c) Are you looking for a job because you jumped before looking what you were going to do next?
d) Why do you think they will enfore this, are you going to a competitor?
But, my instinct is (and I only have *ahem* personal experience) that you can look for employment and suggest to any new employer that the Unfair Contracts Terms Act 1977 limits the effectiveness of the above clause restricting further opportunities for work.
They cannot limit you looking for work, it's a basic human right.
Basically you can argue the toss about anything if you are in England, Wales or NI (case law vs written statute), but you can always hit them with the Convention of Human Rights Article 4 Section 2 "No one shall be required to perform forced or compulsory labour." which is absolute and could be argued applies in this instance.
Get in touch with ACAS, have a trawl through www.employmenttribunals.gov.uk/default.asp and go look for a job.
I do however suspect that you resigned with another job to go to and were then surprised that it was 3 months notice, am I correct?
a) Did you sign the contract as listed above?
b) Are you on gardening leave or did you resign with immediate effect?
c) Are you looking for a job because you jumped before looking what you were going to do next?
d) Why do you think they will enfore this, are you going to a competitor?
But, my instinct is (and I only have *ahem* personal experience) that you can look for employment and suggest to any new employer that the Unfair Contracts Terms Act 1977 limits the effectiveness of the above clause restricting further opportunities for work.
They cannot limit you looking for work, it's a basic human right.
Basically you can argue the toss about anything if you are in England, Wales or NI (case law vs written statute), but you can always hit them with the Convention of Human Rights Article 4 Section 2 "No one shall be required to perform forced or compulsory labour." which is absolute and could be argued applies in this instance.
Get in touch with ACAS, have a trawl through www.employmenttribunals.gov.uk/default.asp and go look for a job.
I do however suspect that you resigned with another job to go to and were then surprised that it was 3 months notice, am I correct?
Hi Double. Thanks for your swift response!
Actually it's my colleague who has resigned, but we were a team of two and I'm bound by the same contract. So:
a. Joined two years ago, but presume we signed it at the time.
b. He's joining the competition so was frogmarched out the building and given Garden Leave. I understand that the non-compete agreement covers the 90 days less the time on garden leave, so just 60 days from final pay day.
c. New job already offered and accepted, and due to start immediately following 4 week notice period (Garden Leave).
d. Joining closest competitor!
We had remembered that this non-compete clause existed, but informal advice and experience from others who have left over the years suggested that they never even tried to enforce it. However, I have just been informed that they are going to enforce it in this case. I do wonder whether they're just trying to scare me away from applying for a job with a competitor too...
Would my company need to pay my ex-colleague during the 60 days following final pay day? Surely they can't expect him to either earn nothing during that period or do a temporary job with a non-competitor?
BTW, Our company is American, but presume the contract will be under UK law?
Actually it's my colleague who has resigned, but we were a team of two and I'm bound by the same contract. So:
a. Joined two years ago, but presume we signed it at the time.
b. He's joining the competition so was frogmarched out the building and given Garden Leave. I understand that the non-compete agreement covers the 90 days less the time on garden leave, so just 60 days from final pay day.
c. New job already offered and accepted, and due to start immediately following 4 week notice period (Garden Leave).
d. Joining closest competitor!
We had remembered that this non-compete clause existed, but informal advice and experience from others who have left over the years suggested that they never even tried to enforce it. However, I have just been informed that they are going to enforce it in this case. I do wonder whether they're just trying to scare me away from applying for a job with a competitor too...
Would my company need to pay my ex-colleague during the 60 days following final pay day? Surely they can't expect him to either earn nothing during that period or do a temporary job with a non-competitor?
BTW, Our company is American, but presume the contract will be under UK law?
Tobeee actually posted the message on my behalf - so I've signed up to give more info.
Yes, I've resigned and given 4 weeks notice as set out in my contract. Yes, I'm on Garden Leave - although this didn't happen for nearly 3 days after I quit.
Yes, I'm going to the competition - and was very (too) honest with my employers as to where I was going.
I used to work with Tobeee and the other day HE ws told by my bosses boss, that they would be enforcing my non-compete. No one has told me this, and I guess they don't have to. Maybe it was just a scare tactic?
Anyway, I find it strange that they would try to enforce it as I only acquire data from signed up clients to audit and my new boss used to work for my "current" employers in Sales and they didn't enforce his!
Everyboduy I gave spoken to tells me they cannot enforce it - and I'm not about to try and trade sales leads.
I'll have a look at that website though.
Thanks
Ian
Yes, I've resigned and given 4 weeks notice as set out in my contract. Yes, I'm on Garden Leave - although this didn't happen for nearly 3 days after I quit.
Yes, I'm going to the competition - and was very (too) honest with my employers as to where I was going.
I used to work with Tobeee and the other day HE ws told by my bosses boss, that they would be enforcing my non-compete. No one has told me this, and I guess they don't have to. Maybe it was just a scare tactic?
Anyway, I find it strange that they would try to enforce it as I only acquire data from signed up clients to audit and my new boss used to work for my "current" employers in Sales and they didn't enforce his!
Everyboduy I gave spoken to tells me they cannot enforce it - and I'm not about to try and trade sales leads.
I'll have a look at that website though.
Thanks
Ian
I have had this clause in many contracts in the past and I was certainly told by many people that it was unenforcable. We had a number of people leave the company to go to a competitor but the clauses in their contracts were never called into force, and the MD was very much the type to force people into adhering to contracts - thus I would think it's shaky ground for an employer to try to use such a clause "in anger".
hiasakite said:
I understood it was unenforceable... the only way they can enforce it is but continuing to pay for the period in question.
Correct, there is no way they can stop you from working unless they pay you for your time at the normal rate of pay. This would include the average bonus you receive. These clauses are typical of American companies and are generally nonsense. If it were me I would ignore it and carry on. If any action is taken it is likely to involve your new company, so its probably best to let them know up front. This is really a business to business competition issue and your part in it is as an employee therefore you are relatively fire proof, however, sometimes one emloyer scares another off if they can prove sharp practice then the publicity is often to be avoided.
Such clauses have become unenforceable - they are in effect a 'restraint of trade' - they stop you from earning a living.
Biggest mistake is telling your current employer where you are going to - you have absolutely no reason to indicate where you are going if you resign from one post.
Biggest mistake is telling your current employer where you are going to - you have absolutely no reason to indicate where you are going if you resign from one post.
this is just plain silly.
most people do a specific kind of job and therefore if they are going to leave and work somewhere else it is more than likely it will be doing a similar job for a competitor.
if they are prepared to pay you for 90 days then that is fine. if they only pay you for 30 days then after that time you can do as you please.
most people do a specific kind of job and therefore if they are going to leave and work somewhere else it is more than likely it will be doing a similar job for a competitor.
if they are prepared to pay you for 90 days then that is fine. if they only pay you for 30 days then after that time you can do as you please.
Hi Tonker
1. We do hold info that would be valuable to the competition - mainly knowledge of tender rates and that sort of thing.
2. I guess that info would become less useful over a couple or four months, by which time our company might have already secured a contract with the client.
3a. "Client" means any person, firm, company or entity which was a client of the Company or any Relevant Group Company at any time during the 12 months prior to Termination and with which the Employee was materially concerned or had personal contact at any time during the said period of 12 months;
3b. "Services" means auditing services which are competitive with those supplied by the Company or any Relevant Group Company in the 12 months prior to Termination and with the supply of which the Employee was materially concerned at any time during the said period of 12 months;
4. The staff poaching thing is not in question.
5. I agree with you! I've rarely questioned a contract of perm emp (unless massive problem) as I'd rather not risk not getting the job!
6. Neither I nor IJRussell would use any secret info once in the new company, and i that info certainly wouldn't help us in our day to day job (we're not in Sales). However, if the current company successfully managed to prevent you beiong on the payroll of the competitor for 90 days, how would they ever know if you were still communicating info to your new boss?
Quite pleased at the interest this post is creating, so keep it up!
>> Edited by tobeee on Wednesday 16th March 10:33
1. We do hold info that would be valuable to the competition - mainly knowledge of tender rates and that sort of thing.
2. I guess that info would become less useful over a couple or four months, by which time our company might have already secured a contract with the client.
3a. "Client" means any person, firm, company or entity which was a client of the Company or any Relevant Group Company at any time during the 12 months prior to Termination and with which the Employee was materially concerned or had personal contact at any time during the said period of 12 months;
3b. "Services" means auditing services which are competitive with those supplied by the Company or any Relevant Group Company in the 12 months prior to Termination and with the supply of which the Employee was materially concerned at any time during the said period of 12 months;
4. The staff poaching thing is not in question.
5. I agree with you! I've rarely questioned a contract of perm emp (unless massive problem) as I'd rather not risk not getting the job!
6. Neither I nor IJRussell would use any secret info once in the new company, and i that info certainly wouldn't help us in our day to day job (we're not in Sales). However, if the current company successfully managed to prevent you beiong on the payroll of the competitor for 90 days, how would they ever know if you were still communicating info to your new boss?
Quite pleased at the interest this post is creating, so keep it up!
>> Edited by tobeee on Wednesday 16th March 10:33
anonymous said:
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Lol No slavery was abolished, they have no chance on 2 to 4. Its a free market economy, that means that a business is vulnerable to hostile attack by either takeover and or the poaching of clients and or key personnel.
Why should a worker be on a sticky wicket because he or she hires themselves out to the highest bidder?
Also no poaching clauses are very hard to enforce, because the situation is always (ahem) that the staff member approached the company, not the other way round, and the 'restraint of trade' argument applies again.
No contact with customers - how does that work? Two companies in competition, Company One hires a staff member from Company Two, and that somehow prohibits Company One from dealing with an existing customer of Company Two? Very hard to show that a particular staff member had any influence on such a deal...
No contact with customers - how does that work? Two companies in competition, Company One hires a staff member from Company Two, and that somehow prohibits Company One from dealing with an existing customer of Company Two? Very hard to show that a particular staff member had any influence on such a deal...
There's a restrictive covenant in my contract (and also my previous one). I was advised that mine would be unenforceable because I'm a niche specialist, and they can't stop me from earning my living.
Secondly, it is illegal for you to take documents from your current employer, but it is impossible for you to unknow what you know. So as long as whatever you take is just in your head, you're protected.
Secondly, it is illegal for you to take documents from your current employer, but it is impossible for you to unknow what you know. So as long as whatever you take is just in your head, you're protected.
anonymous said:
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I have done and its a pain. The trick is though never to put the entire client list in the hands of one person.
IMO the real problem only comes to light when one firm becomes uncompetitive or is being milked by the owners. In these circumstances employees in sales capacity often look to take their reputation elsewhere. A freind of mine did precisely this while the MD snorted the profits up his nose. Your thoughts on a short period to contact all existing customers is interesting. Surely a whole company can contact and inform all customers far more quickly than 1 individual who has just left the building? I realise that there needs to be a balance in place and tbh for the most part I am sure there is, there are always going to be victims though.
anonymous said:
[redacted]
That's an interesting point Tonker. If the person goes to the competition and works for free (perhaps with an arrangement to defer any accrued salary until, say, the fourth month) then does that make the non-compete clause harder to enforce? In IJRussell's case, the start date for the new job is nearing, and the new company will probably be a bit upset if he has to delay starting for three months.
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