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Employment Contract (After Agreed Downgrade)

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Hi,

A friend has just called for some advice which unfortunately is well above my head.

 

He has just accepted a new position in a company after stepping down from a Senior managerial role (for stress related and alleged bullying purposes) which is a downgrade but is the job he wants to do at this present time as he's not then directly working for the alleged bullying manager. He's looking for another job and has made no secret of this fact...

 

His new line manager in the last few weeks has given him a new contract that states he now has to give 6 months notice if he wants to leave and for 12 months after that he cannot work for a list of companies deemed as competitors. As he works in a specialised industry, the company have specifically named any company where he could work and are in my opinion, restricting his trade if he was to leave....

 

Can they do this? He hasn't signed the new contract as he disagrees with it's contents....

 

Any help would be appreciated for him.

 

Kind regards

Edited by honeybee13
Paras.

THE VIEWS POSTED BY MYSELF ARE STRICTLY MY OWN OPINION AND CANNOT BE RELIED ON FOR LEGAL PURPOSES.

IF IN DOUBT, CONTACT A QUALIFIED LEGAL EXPERT

SWISSTONI

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Hi.

 

I expect the employment guys will be along later, but I can see why you think the list of companies is restrictive. I'm sure I've seen threads where people have said it could be unenforceable.

 

Please wait for the experts. :)

 

HB


Illegitimi non carborundum

 

 

 

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There is no simple yes or no answer. They 'can' impose restrictive clauses, but whether they are enforceable or not is another matter altogether and it would ultimately fall to a court to decide if it came to it. In very general terms, a court would only uphold such a clause if it served a specific purpose - for example for a certain period of time in order for the old employer to protect themselves from trade secrets becoming known to a new employer, or for pricing or a trade recipe (for example) to be amended. Such covenant should not be - and cannot be - held to restrict the opportunity for an individual to work, so should be limited in scope, both in terms of the geography and time limit involved, and should only be applied to those with knowledge that the employer could legitimately argue could be used to a competitor's advantage if divulged. The nature of the business would also be a factor

 

Some useful further reading here https://www.jobsite.co.uk/worklife/beware-restrictive-covenants-contract-employment-restrict-options-move-jobs-10827/


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One problem I foresee is you state hehas accepted the new position but not signed the contract..

He cannot have it both ways.

Refuse the position due to the contract or accept the position and contract.

By accepting the position he has effectively accepted the terms.

Its called implied.

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I don't think such a time-limited restriction on key employees is that unusual for a Company working in a specialised Sector, but only an Industrial Tribunal Panel can decide.

The die is probably cast.

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any restrictive contract of that nature snst legal if it is applied as a blanket measure or has onerous geographic or time constraints. So a hairdresser may write a contract that forbids an apprentice elaving upon qualificatio to work for local rivals within the next 3 months but could never have a clauswe that says cant work for any other hairdressers.

Now the timing of these new tems are significant. if they werent mentioned from the outset then he can refuse to accept them but the employer may see that as a sign of a lack of commitment and sack him saying that the trust between the 2 parties has broken down.

If he left anyway they could insist that he and over his list of contacts and make him commit to not using any insder knowledge to drum up business ofr a competitor he then joins under commercial confidentiality.

 

His problem will be that if the field he works in is so small he cant go anywhere else. i had a friend who worked as an artificial limb maker so when he wanted to pack up working for his employer he had to leave the country as there was only one other potential employer in the UK and he was contractually obliged to not work for them. Monopolies are damaging in many ways

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There are leading authority cases on 'restraint of trade'.

 

In Warner Brothers Pictures Incorporated v Nelson [1937] 1 KB 209 , the court ruled on an agreement regarding Nelson (whose stage name was Bette Davis).

The agreement was "she will not, during the term of the contract render any services for or in any motion picture production or productions of any other person ... or engage in any other occupation without the written consent of the producer being first had and obtained’.

The studio felt (correctly) that the second part might be found unenforceable, and that a court wouldn't hold her to doing no otber work for 5 years. They applied (succesfully!) for an injunction preventing her (using the first part) from appearing in other films.

 

In Page One Records v Britton [1968] WLR 157 the court "took a more realistic approach".

There they were less likely to uphold an application for an injunction if it would prevent someone working at all.

The yardstick becomes: the nature of the work / the risk of loss to the original employer, and then the duration the restriction is intended for, and then if other work is available to the employee.

 

.

 

 

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The employer cannot impose a new contract without his consent, but at some stage he will be deemed to consent to the new contract if he continues to work for the employer without objecting to the contract.

 

While he is searching for another job, it is a good idea to say in an email to his manager or HR that he does not accept a 12 month restrictive covenant. If the new employer does try to raise an issue after he has left, the email would help to prove that he did not agree to the new contract.

 

A 12 month non-compete covenant is extremely unlikely to be enforceable except in the case of extremely senior roles. In recent years the courts have been busy striking down these clauses and requiring extremely strong justification to get to 6 months, let along 12.

 

Even if he signed the contract, I think he can be pretty comfortable that 12 months is not going to be legally enforceable. Though it could be enough of an issue for the old employer to kick up a stink.


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It could also be argued that the contract, if restricting employment elsewhere to that extent, should also make provision for extended garden leave for the same period that the covenant is to remain in force. Then and only then might the employer argue that there is sufficient mitigation of the former employee's loss to justify the restrictive clause.

 

So - the employer can impose a 6 month notice requirement, in order to protect them from possible damage by the employee moving to a competitor, but cannot then add a further 12 month restriction. The period of contractual notice should on it's own be sufficient, most likely by not requiring the employee to work out the notice, but also preventing him taking up a position elsewhere. That would be more likely to succeed at court, but only alongside other considerations of seniority, access to sensitive information etc


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Hi Guys - Just wanted to give you an update on this - He signed the contract on provision the 12 months covenant was reduced to 6 and the notice period to 3 months...this was accepted. His Company car was returned, not by request but he wanted no ties with the company when his notice goes in. Got a verbal bill off the company for nearly £1000 for 'damage' to the car 10 minutes before leaving work to go on holiday (slightly kerbed wheels)!!! There was no damage other than this! Disputed this via email and asked for a copy of the relevant policy where it states individuals had to pay for damage to company cars and also asked via email for a copy of the damage report (still awaiting these). Several contracts taken off him by the bullying senior manager because my friend says they were earning large amounts of commission... All in all, he has decided to put his notice in at the end of this month when he gets paid his commission up to date (as he feels they would not pay it if he put his notice in prior) and the likelihood is they will put him on gardening leave for the 3 months. Should they still pay any commission on the wages for this period? His contract says commission is paid at managerial discretion.... Following on from all this, he has become depressed and has sought help from a mental health charity and his GP... A sad state of affairs in the 21st century to a loyal employee of 20+ years who just wouldn't/couldn't accept the companies managerial responsibilities.... Toni


THE VIEWS POSTED BY MYSELF ARE STRICTLY MY OWN OPINION AND CANNOT BE RELIED ON FOR LEGAL PURPOSES.

IF IN DOUBT, CONTACT A QUALIFIED LEGAL EXPERT

SWISSTONI

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I'm afraid you've answered the question. Commission is paid on management discretion. They say no, then he doesn't get it.

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First question; where did they get the figure of £1000 for the damage?

 

Was it plucked out of the air or a Repair Company quoted it?

 

Most contract would state that the employee is to pay for damages to the car

 

For cosmetic damages, the employee has Right to Repair (I believe this is cosmetic)

 

However, the employer could remove that Right on justifiable grounds

 

If the employer removes that Right unjustifiably, then they can ask him to pay for it.

 

You need to look at the contract and you need to find out the grounds on which the Right to Repair was removed.

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All in all, he has decided to put his notice in at the end of this month when he gets paid his commission up to date (as he feels they would not pay it if he put his notice in prior) and the likelihood is they will put him on gardening leave for the 3 months. Should they still pay any commission on the wages for this period? His contract says commission is paid at managerial discretion.... Toni

 

 

To answer your question on commission, I will first talk about bonus

 

 

In Clark v Nomura International plc, it was stated that a discretion must be exercised rationally and fairly.

 

Companies cannot act in a perverse manner even though they have "discretion"

 

 

In Small and others v Boots Co plc and others, the Court decided that though the bonus is discretional, it has a contractual effect

 

So, in reality, it is a contract and failure to pay would be a breach of contract

 

 

In Land Registry v Houghton and others, the Court rules that failure to pay bonus was an indirect discrimination

 

The Claimants were disabled and tend to fall ill regularly

 

The discretionary bonus was tied to a number of sick leave.

 

Since these claimants were absent due to their disability, the Court ruled that the PCP was discriminatory

 

Hence the non-payment was discriminatory

 

Now to Commission.

 

In Robertson v Blackstone Franks Investment Ltd, the Court ruled that non-payment of commission was an unlawful deduction of wages

 

 

However, I believe your strongest point will be using the position of the courts in bonus payment

 

 

It is almost an agreed fact in law that discretion should be exercised fairly

 

I would state BOLDLY if he has earned it then he MUST get it

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I'm not sure I agree with that, Dd. Unless things have changed in recent times, people I knew who were on commission or bonuses always resigned after the bonus was paid.

 

HB


Illegitimi non carborundum

 

 

 

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I'm not sure I agree with that, Dd. Unless things have changed in recent times, people I knew who were on commission or bonuses always resigned after the bonus was paid.

 

HB

 

There is a huge difference between Google and actual application. You are not incorrect, unless you wish to make up a few facts and believe them to be true!

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I'm not about making up facts, Sangie. :)

 

 

HB


Illegitimi non carborundum

 

 

 

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To answer your question on commission, I will first talk about bonus

 

 

In Clark v Nomura International plc, it was stated that a discretion must be exercised rationally and fairly.

 

Companies cannot act in a perverse manner even though they have "discretion"

 

 

Over ruled by Commerzbank AG v Keen[2006] EWCA Civ 1536


Never assume anyone on the internet is who they say they are. Only rely on advice from insured professionals you have paid for!

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Over ruled by Commerzbank AG v Keen[2006] EWCA Civ 1536

 

 

Restored in Dresdner Kleinwort Ltd and Another v Attrill and Others: CA 26 Apr 2013

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Judgement links:

 

Commerzbank Ag v Keen:

http://www.bailii.org/ew/cases/EWCA/Civ/2006/1536.html

 

Dresdner Kleinwort Ltd & Anor v Attrill & Ors [2013] EWCA Civ 394 [26 April 2013]:

http://www.bailii.org/ew/cases/EWCA/Civ/2013/394.html

 

Please read these Judgements very carefully.


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I have. The bonus (not commission) payable in Dresden Kleinwort became a legal obligation after a company board decision and subsequent announcement that it would be paid, which is not the position here at all. The wording of the case is “Appeal against High Court ruling that the claimants were due payments from a bonus pool in terms set out by the CEO and communicated via the company intranet”

 

None of which school debate club helps the OP. My message is take all advice with caution.

 

I believe if the base salary is reasonable then commission should be regarded as non contractual and discretionary. It sounds like that is the case here.


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If commission is not Contractual the Co does not have to pay it, despite employee expectations, but try running a s Sales Force without incentives, other than a basic salary.

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