Restrictive covenants
Discussion
A little background to start with, I’ve worked for a company for a number of years as a sales consultant to a particular industry. B2C but a “niche” market, customer base is still in the hundreds of thousands though.
For the last year and a half I have not sold, instead working directly under the head of sales in more of an admin/managerial role.
Long story short the head of sales left, I was asked to go back out selling with loss of additional salary, I’ve therefore accepted a job offer for a comepitor.
I’ve handed my resignation in and received this reply (as one of the points):
“
In simple terms, the restrictions outlined in your contract refrains you for 3 months from your termination date to do the following:
• Work for a competitor who is selling the same financial services as you have been selling to the *niche market*”
Which to me says I can’t work for any competitor, not just sell to the same market but actually not work for them at all.
So for the last 18 months I haven’t sold anything, I have a 3 month notice period which they now want me to go out and sell again but then can not work for a competitor at all.
So my question is how legal is this?
Cutting the bulls
t their main issue is they do not want to send me on gardening leave, but after not being on the road for 18 months I have not been to any areas or seen any customer to do business with. They now want to try sending me to all of them so I can’t go to any after my notice period for 3 months. Is this an action to try restricting me to work?
For the last year and a half I have not sold, instead working directly under the head of sales in more of an admin/managerial role.
Long story short the head of sales left, I was asked to go back out selling with loss of additional salary, I’ve therefore accepted a job offer for a comepitor.
I’ve handed my resignation in and received this reply (as one of the points):
“
In simple terms, the restrictions outlined in your contract refrains you for 3 months from your termination date to do the following:
• Work for a competitor who is selling the same financial services as you have been selling to the *niche market*”
Which to me says I can’t work for any competitor, not just sell to the same market but actually not work for them at all.
So for the last 18 months I haven’t sold anything, I have a 3 month notice period which they now want me to go out and sell again but then can not work for a competitor at all.
So my question is how legal is this?
Cutting the bulls
t their main issue is they do not want to send me on gardening leave, but after not being on the road for 18 months I have not been to any areas or seen any customer to do business with. They now want to try sending me to all of them so I can’t go to any after my notice period for 3 months. Is this an action to try restricting me to work? Could the fact they've bumped you down to a lesser job with less pay give you an argument for constructive dismissal?
They may well be able to enforce the restrictive covenant, but if they were threatened with an employment tribunal, maybe you could agree to both quietly go your separate ways.
Not a lawyer.
They may well be able to enforce the restrictive covenant, but if they were threatened with an employment tribunal, maybe you could agree to both quietly go your separate ways.
Not a lawyer.
desolate said:
If it's in the contract you signed it could be enforceable.
There are a few threads on here where a PHer who is an expert in this field posted some proper advice with precedents.
First thing to do is find your contract.
Found my original one but the company was taken over a number of years ago and don’t have that contract but will request on Monday.There are a few threads on here where a PHer who is an expert in this field posted some proper advice with precedents.
First thing to do is find your contract.
swerni said:
3 months not working for a direct competitor sounds reasonable in sales ( I assume you're in sales, I don't know what a " sales consultant" actually is").
Making you work your notice period is laughable, how productive do they expect you are going to be?
It would except my new role isn’t going to be selling, the wording of that terms seems to say I can not work for them at all. Making you work your notice period is laughable, how productive do they expect you are going to be?
Tim2k9 said:
I’ve handed my resignation in and received this reply (as one of the points):
“In simple terms, the restrictions outlined in your contract refrains you for 3 months from your termination date to do the following:
• Work for a competitor who is selling the same financial services as you have been selling to the *niche market*”
You need to check the wording of the contract, as others have said.“In simple terms, the restrictions outlined in your contract refrains you for 3 months from your termination date to do the following:
• Work for a competitor who is selling the same financial services as you have been selling to the *niche market*”
That reply you received has clearly been written by a halfwit.
Who on earth would write “refrains you for...”? It’s complete nonsense.
As has been said, on the face of three months is not unreasonable and is likely to be enforceable.
What I would say is that, as they have declined to place you on gardening leave then I would feel little concern about saying 'bugger off' when asked to do something you don't feel like doing, or you would feel would negatively impact you in the future.
What I would say is that, as they have declined to place you on gardening leave then I would feel little concern about saying 'bugger off' when asked to do something you don't feel like doing, or you would feel would negatively impact you in the future.
crofty1984 said:
Could the fact they've bumped you down to a lesser job with less pay give you an argument for constructive dismissal?
I was thinking that - couldn't you just say "no"? They'd have to make you redundant or just fire you then. I suppose they also could say "OK" and let you carry on though.On the enforceability of restrictive covenants, my next-door neighbour got into trouble with his, which was for 12mths and prevented him from working in the same field. His new company challenged it and spent £40K on legal fees but got frustrated that opinion was all over the place. So a compromise was reached where his old firm would pay him 50% salary for 12mths and his new one would wait.
Tim2k9 said:
...
In simple terms, the restrictions outlined in your contract refrains you for 3 months from your termination date to do the following:
• Work for a competitor who is selling the same financial services as you have been selling to the *niche market*”
Which to me says I can’t work for any competitor, not just sell to the same market but actually not work for them at all.
...
It it unlikely to mean that. I suspect that it does not say that either, but I see that you have honoured the noble PH tradition of asking for advice on the term of a contract but failing to state the exact wording of the term or to describe the business context in any detail.In simple terms, the restrictions outlined in your contract refrains you for 3 months from your termination date to do the following:
• Work for a competitor who is selling the same financial services as you have been selling to the *niche market*”
Which to me says I can’t work for any competitor, not just sell to the same market but actually not work for them at all.
...
Breadvan72 said:
It it unlikely to mean that. I suspect that it does not say that either, but I see that you have honoured the noble PH tradition of asking for advice on the term of a contract but failing to state the exact wording of the term or to describe the business context in any detail.
I’ve uploaded a screenshot of the contract term they are relying on.
1. Lawyer up. now.
2. See above.
3. If I were your lawyer (which I am not) I would argue that clause (a) is too wide in scope to be reasonable. It applies regardless of the capacity in which you might be employed by a competitor. The words or similar are arguable too wide and insufficiently clear. Clause (b) is probably reasonable.
4. Lawyer up, now.
5. See above.
6. Take this seriously.
7. Lawyer up, now.
8. See 1, 4, and 7 above.
NB: Lawyer does not mean Not Joe High Street Lawyer who did you mum's conveyancing. PM for some recommendations.
2. See above.
3. If I were your lawyer (which I am not) I would argue that clause (a) is too wide in scope to be reasonable. It applies regardless of the capacity in which you might be employed by a competitor. The words or similar are arguable too wide and insufficiently clear. Clause (b) is probably reasonable.
4. Lawyer up, now.
5. See above.
6. Take this seriously.
7. Lawyer up, now.
8. See 1, 4, and 7 above.
NB: Lawyer does not mean Not Joe High Street Lawyer who did you mum's conveyancing. PM for some recommendations.
swerni said:
Seeing as your contract says 12 months and they are now saying only 3 months, looks like a bit of a result. 
He can't be employed or set up a company in three months which directly or indirectly could be considered to be a supplier/client/competitor etc of his current firm in the last 12 months... That is the disparity between the 3 and 12 months to which you refer (IIRC what I just glanced at).OP I suspect that the first clause is a bit too wide ranging - you could not even be a cleaner for a direct competitor for example and suggesting it may affect Goodwill?! I struggle to consider that insufficiently clear or even calculatable really.
However, you do want to take insured advice on this issue, take this to a Covenant specialist.
Oh and they will also check if there is a severability clause in the contract and even if you can claim CD as a party above noted (suspect not given you appear to have continued to operate there and may well be deemed to have accepted the reduced pay, but maybe not, if not of course then their clause may not be enforced either - so you need to go see a lawyer and show them the whole contract and facts to get advice!!)
Seems a bit of a rum do to demote the guy then enforce these terms when he looks to better himself elsewhere, I get that senior personnel have to be tied in to such terms but the role sounds pretty low level and it seems pretty petty to enforce terms on someone you clearly don't value..
I wouldn't treat my staff like that and nor have I been treated like that when I've moved to and from competing businesses even though that was at sales director level, the restrictions were there but not enforced as I came to a gentlemen's agreement with my MD.
Having to lawyer up to move from one standard role to another, seems crazy.
I wouldn't treat my staff like that and nor have I been treated like that when I've moved to and from competing businesses even though that was at sales director level, the restrictions were there but not enforced as I came to a gentlemen's agreement with my MD.
Having to lawyer up to move from one standard role to another, seems crazy.
A restrictive covenant (as with any contract term) may be severable regardless of the presence in or absence from the contract of an express severability clause.
The extent of lawyering-up that may be required in the present case may vary from (1) one consultation and one letter, to (2) litigation to trial and (unlikely) appeal (with all stages in between). Where, however, an employer is sufficiently exercised about its covenants to write an initial letter seeking to apply them, then the sensible employee does not rely on what anonymous people on a car forum say, but instead consults a medium sized business law firm, or a small employment law boutique, or a direct access junior barrister. This costs a few hundred pounds. Not spending this money may result in no adverse consequences, or it may result in months or years of litigation and a bill large enough to cause most people to have to sell their houses. Early advice is better than late advice.
Mandy Rice Davis points may be suggested, but I have no dog in this fight, as I am none of the type of lawyer mentioned above (but I can recommend one of each type).
PS: CAB? Avoid, unless the CAB has an HLA (Honorary Legal Adviser) who has a business/employment law practice. Most HLAs tend to know about debt, family law, housing law, and unfair dismissal etc. A very few may know about employment covenants.
PPS: Bloke in pub: AVOID.
The extent of lawyering-up that may be required in the present case may vary from (1) one consultation and one letter, to (2) litigation to trial and (unlikely) appeal (with all stages in between). Where, however, an employer is sufficiently exercised about its covenants to write an initial letter seeking to apply them, then the sensible employee does not rely on what anonymous people on a car forum say, but instead consults a medium sized business law firm, or a small employment law boutique, or a direct access junior barrister. This costs a few hundred pounds. Not spending this money may result in no adverse consequences, or it may result in months or years of litigation and a bill large enough to cause most people to have to sell their houses. Early advice is better than late advice.
Mandy Rice Davis points may be suggested, but I have no dog in this fight, as I am none of the type of lawyer mentioned above (but I can recommend one of each type).
PS: CAB? Avoid, unless the CAB has an HLA (Honorary Legal Adviser) who has a business/employment law practice. Most HLAs tend to know about debt, family law, housing law, and unfair dismissal etc. A very few may know about employment covenants.
PPS: Bloke in pub: AVOID.
Edited by anonymous-user on Tuesday 3rd July 16:37
Thanks very much everyone, it has been really helpful.
Final questions I was put on gardening leave and have received an email confirming this, they have since sent a letter confirming this and this paragraph confirming the restrictive covenant
“These apply for a 3 month period following the termination of your employment and whilst the duration of the restrictive covenants at clause 18.1 will be reduced by one day for each day you are placed on garden leave we regard them as very important. In other words we expect you to comply with them.”
Final questions I was put on gardening leave and have received an email confirming this, they have since sent a letter confirming this and this paragraph confirming the restrictive covenant
“These apply for a 3 month period following the termination of your employment and whilst the duration of the restrictive covenants at clause 18.1 will be reduced by one day for each day you are placed on garden leave we regard them as very important. In other words we expect you to comply with them.”
Tim2k9 said:
Thanks very much everyone, it has been really helpful.
Final questions I was put on gardening leave and have received an email confirming this, they have since sent a letter confirming this and this paragraph confirming the restrictive covenant
“These apply for a 3 month period following the termination of your employment and whilst the duration of the restrictive covenants at clause 18.1 will be reduced by one day for each day you are placed on garden leave we regard them as very important. In other words we expect you to comply with them.”
If I'm reading that right, they expect you to not work for a competitor for three months AFTER you've stopped working for them? That can't reasonably be enforced surely?Final questions I was put on gardening leave and have received an email confirming this, they have since sent a letter confirming this and this paragraph confirming the restrictive covenant
“These apply for a 3 month period following the termination of your employment and whilst the duration of the restrictive covenants at clause 18.1 will be reduced by one day for each day you are placed on garden leave we regard them as very important. In other words we expect you to comply with them.”
MissChief said:
[If I'm reading that right, they expect you to not work for a competitor for three months AFTER you've stopped working for them? That can't reasonably be enforced surely?
You are reading it wrong. The period of the post termination restraint is discounted day by day for garden leave, and so will not last three months. But it could in another case. The longest post termination restriction on working for a competitor that I have seen enforced (in an employee case as opposed to a business vendor case) lasted two years. That is rare, but three month restrictions are often upheld. All depends on wording, and context.
Edited by anonymous-user on Tuesday 3rd July 16:44
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