post terminatio​n restrictiv​e covenants

[CAM35]

Hi,

 

I'm due to move to a new company in 3 weeks time and despite handing in my notice nearly 10 weeks ago my current employers have decided that i have breached the restrictive covenants in my contract and have sent me a letter from their solicitors looking for an injunction to stop me starting my new role ?

 

A few facts of this are:

 

• there is a cross over of products between my current & new employers but there core products are different although in the same industry so not entirely direct competitors
  
• the core products amount of business only accounts for 1.35% of my exisiting companies business which they are trying to protect
  
• I have worked in this industry all my life and have therefore built my career and knowledge in this industry
  
• I am still working for my current employer they decided not to grant gardening leave. In fact I'm still out selling for them albeit on the Trade side and not the retail side which is my usual area.
  
• I know of other employees who have left for direct competitors and nothing happended.
  

So my question is can they really enforce these and what are my next steps. Do I need a solicitor or should I acknowledge the letters myself ???

[marmaris30]

This probably is one for a solicitor I'm afraid. To give a meaningful answer would probably need you to post up your contract, which even if you anonymised it, would probably identify you.

 

Although in principle, nobody should restrict your freedom to choose to whom you sell your labour, competitor or otherwise, as long as you're not working for both at the same time (including leave), nor actually taking any company papers or other physical property with you. One might argue that the contract is unreasonable on that basis.

 

As you say, gardening leave is the normal protective step taken and they have chosen not to do so. The question is whether their threats would stand up in Court and result in either damages or an expensive legal bill on your part.

[marmaris30]

If you're still in touch with your other colleagues who left without any action resulting against them, then you could call them as witnesses - but for all we know, your case might have some significant differences.

[Sidewinder]

Have to say that I agree with the above - it is impossible to advise for certain (and even then it would not be conclusive) unless we were to know precisely what the covenant restricts. In very general terms, a clause which is overly restrictive and effectively prevents you gaining employment in your field would be considered unlawful, but this very much depends on factors such as any geographical restriction, the length of time that any restriction applies, and the level of information that you are privy to in your current employment. Ultimately it is down to whether the covenant serves to protect legitimate business interests only, or whether it is deemed punitive, but the starting point is always that any clause preventing employment is unlawful, and the enforceability or otherwise is then assessed on the various factors which may justify the current employer's need to protect their interests.

 

If you were a relatively junior employee, with little or no access to classified information (for example product launches, sensitive technical information etc) then the employer may not be able to justify a restriction on future employment, however as you become more senior, a restrictive covenant may be seen as more reasonable.

 

Sadly, legal advice is almost certainly essential. Let us know how you get on.

[CAM35]

Thanks for the replies so far. The claues are :

"except with the prior written consent of theBoard, you shall not during the Restricted Period be engaged or interested inor concerned with (in any capacity whatsoever and whether on your own accountor in conjunction with any other party) any person, firm or company carrying onthe Restricted Business within the UK.

“except with the priorwritten consent of the Board, you shall not in competition with the Companyduring the Restricted Period…canvass or solicit orders or facilitate thecanvassing or solicitation of orders in respect of the Restricted Business fromany person firm or company who or which at the date of termination of youremployment hereunder is or at any time during the period of 12 months priorthereto was a customer of the Company, such person firm or company being orhaving been such a customer of whom you have knowledge or with whom you havedealt at any time during the period of 12 months prior to the termination ofyour employment…”

What I'm really struggling with is that the company are only entitled to protect their ligitimate business interests so as the turnover of the account in question is such a small proportion of the business that does not seems reasonable. In fact the actual products sold which are exactly the same is only 0.14% of turnover !!! I'm also still actively selling their products and whilst this is in a different sector I see all the internal communication of the revenue, profits, new products etc... So surely if they wanted to protect there business why continue to let me sell and continue to expose me to sensitive information ??? Also why leave it so late......even i was scared enough to suddenly decide not to join this new company how on earth am I supposed to find work in 3 weeks ??? Why can I not further my career???

[Emmzzi]

1. legitimate business interest is not defined by %age turnover, so drop that idea

2. they haven't left it late, you chose not to read your contract!

3. If they choose not to put you on garden leave that really isn't your business either. The law doesn't change because you think they are stupid.

4. your case depends on the industry. 12 months MAY be overly restrictive. Also there is no geographic area noted by the looks of it? BUT you need a lawyer! Either that or just gamble and see what happens. Or retract your resignation.

[becky2585]

Ok, the point in relation to the covenants applying to anyone you had dealings 12 months PRIOR to the termination of your employment is entirely normal and reasonable.

 

It's the restriction imposed after the termination I would like to know about. What is the "restricted period" defined as, ie the length of time you are bound by the covenants?

 

Also, do they define "restricted business" and "restricted customer"? That's very important.

[CAM35]

1. legitimate business interest is not defined by %age turnover, so drop that idea

2. they haven't left it late, you chose not to read your contract!

3. If they choose not to put you on garden leave that really isn't your business either. The law doesn't change because you think they are stupid.

4. your case depends on the industry. 12 months MAY be overly restrictive. Also there is no geographic area noted by the looks of it? BUT you need a lawyer! Either that or just gamble and see what happens. Or retract your resignation.

 

Thanks Emmzzi - I am going to get some advice from a solicitor but just wanted other opinions on this. What is legitimate business interest defined as then ?? Surely there are trying to protect the business i looked after and may look to take ??? So how can the amount of business involved not be a factor? There is no mention of geographical area and this role is a national sales role with a retailer. Also the restricted period is 6 months not 12. The company im going to work for are specialists in a different product to my current one albeit in the same industry so the core products of the two companies are different......

[Emmzzi]

Any potential loss of interest is a legitimate business interest.

 

As a novel idea, have you considered just having a chat with your company to make sure they understand the new job you are going to? You know, before everyone goes to court....

[CAM35]

They do understand the job I'm going to because I made that clear. It's basically the same job I'm currently doing for the same customer. The new employer us a bigger, more recognised brand with more market share. I guess I'll need to spend money I haven't got on a solicitor

[CAM35]

The other thing is my position was filled quite quickly so no option of retracting my resignation. Also the account hasn't suffered because they filled the position so quickly.

[becky2585]

If the job is substantially different, there's really no need.

 

Plus, are they really going to want to spend in excess of ten grand in obtaining a high court injunction? I think it's unlikely.

[CAM35]

Becky, the job is pretty much the same looking after the same customers. However the company I'm going to work for already have a bigger, better relationship which I'll be taking over so it's not as if I'll be taking a customer away from my existing employer?

[Emmzzi]

Cam, you're pretty much just going to have to take a punt, aren't you? Good luck!