Question about employment law.

[stuart-b]

Quick question RE: employment law.

Person A works at Company B. Person A is a programmer and deals with customers at Company B.

Person A leaves Company B, sets up competing business as Company C.

Person A contacts customers from Company B and offers services, with inside knowledge from Company B.

---

Now i've been speaking to someone who thinks you can't put terms in an employment contract that state you can't set up within X years or X miles from this business OR contact the old clients.

He argues that it's a restriction of employment possibilities and thus not valid under EU Law.

This is true, or can you impose such restrictions on said employee as an employer and thus protect your IP and business.

Thanks.

[esselte]

You used to be able to put a clause in like that.I think it was time limited though,obviously the knowlegde you have about/from company B will be less useful the older it is...

[stuart-b]

esselte said:

You used to be able to put a clause in like that.I think it was time limited though,obviously the knowlegde you have about/from company B will be less useful the older it is...

OK.

I appreciate that if you have a relationship with said clients, and you provide a lot more than a newly established business you have little to worry about..... initially. But, ex-employees know your products, IP, costings, workings, etc. It puts you in a vunerable position.

Just wondering what protection employers have these days.

Edited by stuart-b on Tuesday 10th March 11:49

[esselte]

stuart-b said:

esselte said:

You used to be able to put a clause in like that.I think it was time limited though,obviously the knowlegde you have about/from company B will be less useful the older it is...

OK.

I appreciate that if you have a relationship with said clients, and you provide a lot more than a newly established business you have little to worry about..... initially. But, ex-employees know your products, IP, costings, workings, etc. It puts you in a vunerable position.

Just wondering what protection employers have these days.

Edited by stuart-b on Tuesday 10th March 11:49

As I said the clause was time limited about a year I think...most businesses change in that length of time so any info your ex-employee has will be well out of date...

[stuart-b]

esselte said:

stuart-b said:

esselte said:

You used to be able to put a clause in like that.I think it was time limited though,obviously the knowlegde you have about/from company B will be less useful the older it is...

OK.

I appreciate that if you have a relationship with said clients, and you provide a lot more than a newly established business you have little to worry about..... initially. But, ex-employees know your products, IP, costings, workings, etc. It puts you in a vunerable position.

Just wondering what protection employers have these days.

Edited by stuart-b on Tuesday 10th March 11:49

As I said the clause was time limited about a year I think...most businesses change in that length of time so any info your ex-employee has will be well out of date...

OK - I will have to take a look. businesslink.gov.uk is always a good start.....

[Dr_Gonzo]

Many contracts will have some form of restrictive covenant which will say something along the line of "if you leave you can't nick our clients/customers". The covenant can't be a barrier to you trade i.e. it can't say that you can't be a programmer in that area. However, you could get into trouble if you contact you ex-company's clients/customers directly and/or use insider information.

In reality though these covenants can be very hard to police. We had a mong leave us who blatently went after our clients. He didn't manage to take that many and the one's he did were only one's he handled anyway. The legal costs of trying to prevent him doing what he did would probably far exceeded the losses we suffered. I did however heard of a similar instance within another company in our industry and they won a big payout from the ex-employee.

[esselte]

G'kar said:

You'd have a hard time against person A.

But person B is clearly in the wrong and could be dismissed.

I think that the "inside knowledge" is that which person A has from his employment with company B

[G'kar]

esselte said:

G'kar said:

You'd have a hard time against person A.

But person B is clearly in the wrong and could be dismissed.

I think that the "inside knowledge" is that which person A has from his employment with company B

Yep, re-read it and came to the same conclusion.

[Firefoot]

It is certainly possible to put these clauses into contracts, or issue a specific confidentiality agreement which contains such restrictive covenants. We have a period of 1 year in ours which was deemed to be reasonable by our solicitor, and more than 1 year isn't really workable. The agreement prevents an ex-employee directly competing with us, carrying out exactly the same role with a direct competitor, poaching our employees and customers.

It also covers intellectual property rights and know-how.

How you actually police this is tricky and I am pleased to say I have never needed to enforce the agreement.

[vxr8mate]

I don't believe there is an unwritten rule to say you can't contact said clients however you should check any papers you signed. These covenants are enforcable and do work but you are right to say they are often resricted by time and distances.

[stuart-b]

vxr8mate said:

I don't believe there is an unwritten rule to say you can't contact said clients however you should check any papers you signed. These covenants are enforcable and do work but you are right to say they are often resricted by time and distances.

Ok thanks, it's to protect my business - that's why I'm interested. I wanted to check after the conversation I had with a chap working for a company up north. He wants to leave, and thinks he can just set up and approach their clients...

[NDA]

A lot of this depends on what is written in the contract of employment which person A was happy to sign.

Whilst a restriction of trade is one matter (you couldn't stop a shepherd working with sheep for example), there are many restrictions and dozens of legal cases against employees going after previous customers and staff.

Person A needs to read their contract carefully and not assume that 'restriction of trade' actually works.

[randomman]

You need to re-read your original contract. It will have details in there on this.

AFAIK 1-2 years is the norm. And they can't tell you where you can and can't set up.

[Jasandjules]

vxr8mate said:

I don't believe there is an unwritten rule to say you can't contact said clients however you should check any papers you signed. These covenants are enforcable and do work but you are right to say they are often resricted by time and distances.

They tend to be very, uh, on the side of the employee as well when interpreted by the courts.

The exact terms of the clause will need to be known along with the business.. Because the decision often falls on the facts.....

[stuart-b]

NDA said:

A lot of this depends on what is written in the contract of employment which person A was happy to sign.

Whilst a restriction of trade is one matter (you couldn't stop a shepherd working with sheep for example), there are many restrictions and dozens of legal cases against employees going after previous customers and staff.

Person A needs to read their contract carefully and not assume that 'restriction of trade' actually works.

Thanks NDA, I thought as much.

Next time I'm in town, take me for a spin in the GT!

[NDA]

I've been on the end of this and a very very general rule of thumb would say this... If it's a middle manager, more than 6 months would be unenforceable, if it's someone at the top end, more than 12 months would be unenforceable. Even so, it would allow working in the sector but not with the same customers..

HOWEVER, most non competes (at least in my sector) were linked to a period of garden leave and the non compete clock started to run at the end of the garden leave period rather than at the start.

It's hard to offer any general advice other than reading the contract very closely.


EDIT

You're not that far away - happy to take you for a spin.

Happy to look through some contract wording if it would help - PM if you need to.

Edited by NDA on Tuesday 10th March 15:08

[stuart-b]

NDA said:

I've been on the end of this and a very very general rule of thumb would say this... If it's a middle manager, more than 6 months would be unenforceable, if it's someone at the top end, more than 12 months would be unenforceable. Even so, it would allow working in the sector but not with the same customers..

HOWEVER, most non competes (at least in my sector) were linked to a period of garden leave and the non compete clock started to run at the end of the garden leave period rather than at the start.

It's hard to offer any general advice other than reading the contract very closely.

Thanks again.

We are actually looking to take on another member of staff who would potentially have access to the IP and customer base of the business - hence why I asked this question; after this chap I know talked of moving away and robbing all the clients ... somewhat worrying.

However, we deal with a lot of FSA regulated companies, and it would be difficult for one person to leave and convince the clients to leave with them if the client(s) were already happy with us.

Plus the systems have taken months/years of development and unless a complete clone was made, it would make stealing pretty much impossible, IF the client remains happy and on our side

[NDA]

stuart-b said:

NDA said:

I've been on the end of this and a very very general rule of thumb would say this... If it's a middle manager, more than 6 months would be unenforceable, if it's someone at the top end, more than 12 months would be unenforceable. Even so, it would allow working in the sector but not with the same customers..

HOWEVER, most non competes (at least in my sector) were linked to a period of garden leave and the non compete clock started to run at the end of the garden leave period rather than at the start.

It's hard to offer any general advice other than reading the contract very closely.

Thanks again.

We are actually looking to take on another member of staff who would potentially have access to the IP and customer base of the business - hence why I asked this question; after this chap I know talked of moving away and robbing all the clients ... somewhat worrying.

However, we deal with a lot of FSA regulated companies, and it would be difficult for one person to leave and convince the clients to leave with them if the client(s) were already happy with us.

Plus the systems have taken months/years of development and unless a complete clone was made, it would make stealing pretty much impossible, IF the client remains happy and on our side

Never be, and I'm sure you're not, complacent about ex employees damaging your business. An old friend has had his business killed by an employee setting up in competition - they had no formal contracts to fall back on.

I have contractual wording from my own contract if you ever need to build something stronger into your terms and conditions. I'm about to go out for a few hours, but happy to send you the detail if needed.

[stuart-b]

NDA said:

stuart-b said:

NDA said:

I've been on the end of this and a very very general rule of thumb would say this... If it's a middle manager, more than 6 months would be unenforceable, if it's someone at the top end, more than 12 months would be unenforceable. Even so, it would allow working in the sector but not with the same customers..

HOWEVER, most non competes (at least in my sector) were linked to a period of garden leave and the non compete clock started to run at the end of the garden leave period rather than at the start.

It's hard to offer any general advice other than reading the contract very closely.

Thanks again.

We are actually looking to take on another member of staff who would potentially have access to the IP and customer base of the business - hence why I asked this question; after this chap I know talked of moving away and robbing all the clients ... somewhat worrying.

However, we deal with a lot of FSA regulated companies, and it would be difficult for one person to leave and convince the clients to leave with them if the client(s) were already happy with us.

Plus the systems have taken months/years of development and unless a complete clone was made, it would make stealing pretty much impossible, IF the client remains happy and on our side

Never be, and I'm sure you're not, complacent about ex employees damaging your business. An old friend has had his business killed by an employee setting up in competition - they had no formal contracts to fall back on.

I have contractual wording from my own contract if you ever need to build something stronger into your terms and conditions. I'm about to go out for a few hours, but happy to send you the detail if needed.

Thanks. Will send you a PM a bit later tonight when I get back.

[Brown and Boris]

Hairdressers often have the 'can't set up within X miles' in their contracts. Even parts of the public sector have rules saying you can't take a job with a supplier for X months after you leave. I think reasonableness is the word.