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Employment law question

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Hi guys - I know this is off topic, but a friend has asked for my help with an urgent employment law question, and I don't know the answer... She is due to sign a contract tomorrow to start work in…
NeoDoug1 Avatar
2y, 2m agoPosted 2 years, 2 months ago
Hi guys - I know this is off topic, but a friend has asked for my help with an urgent employment law question, and I don't know the answer...

She is due to sign a contract tomorrow to start work in a shop, but her contract states that for a period of 2 years following termination of employment she is not permitted to be employed by any business that could be seen to be in competition with this shop : in other words, if she works in this shop, when and if she decides to leave, she will not be allowed to work in ANY other shop (within 100 miles of ANY branch of this shop)! Is this legal?!?

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NeoDoug1 Avatar
2y, 2m agoPosted 2 years, 2 months ago
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(28) Jump to unreadPost an answer
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#1
Is that if she leaves or if she is released?
#2
It's not an unusual requirement, but normally only applies to staff who would have knowledge of sensitive information.
#3
Ive seen it in contracts before but, at the end of the day, if a contract has come to an end then the T&C's of that contract can no longer apply (basically, what can the ex employer actually do about it?)

Edited By: stuarthanley on Jan 04, 2015 21:49
#4
this clause is normally used where someone has client leads and they dont want them to be able to use the information/client base and is perfectly legal
banned#5
standard practice
#6
Perfectly legal and standard practice.

However, I would suspect these terms in a contract aren't really worth much as it would be classed as restriction of trade. I had it written in my last contract at my last employer, however I only saw the employer get a bit heavy handed with one very senior member of staff when they wanted to move to a direct competitor.
#7
if she were to leave and break the clause the employer may take her to court. whether or not are successful in the court depends upon whether the clause is reasonable. with employer and employee contracts it is assumed in law the employer has dominate influence ie an employee might feel pressured to sign a contract that is not fair. this is why to be successful the employer must show the clause is reasonable. how reasonable it is will depend upon how much risk there would be to the employers business by her breaking the clause. case law shows that the employer cannot effectively stop the person being able to work with one of these clauses.
#8
it's to stop you setting up a like for business using their clients and undercutting them so they loose business
#9
i signed the same term when working for a stationery company bout 15 years ago.. wouldnt worry about it.. it generally means within the same background so at the time it meant whsmiths or art store...
#10
Cheers for the help guys! Here's the clause as stated in the contract :

Re: Non-Compete Letter

For good consideration and as an inducement for XXXXXXX LIMITED to employ XXXXXXX XXXXXXX the mentioned Employee in is obliged to respect the covenants contained in this Non - Compete obligation and the definitions in the schedule thereto.

Non-compete Covenant

The Employee hereby is obliged not to:
1) Directly or indirectly compete with the business of the Company and its associated companies during the period of employment and for a period of two years following termination of employment and notwithstanding the cause or reason for termination.
And
2) for a period of two years following termination of employment; directly or indirectly, whether on his/her own behalf or in conjunction with any person, company, business entity or other organisation whatsoever, solicit, assist in soliciting, accept, or facilitate the acceptance of, or deal with, in competition with the Company, the custom or business of any Customer or Prospective Customer with whom he/she has had substantial personal contact or dealings
on behalf of the Company during the period of employment.

This non-compete obligation shall extend only for a radius of 100miles from the present work place or any other company’s branch. The term "not compete" as used herein shall mean that the Employee shall not
own, manage, operate, consult or be employed in a business substantially similar to, or competitive with the present business of the Company or such other business activity in which the Company may substantially engage during the term of employment.
#11
aravin
if she were to leave and break the clause the employer may take her to court. whether or not are successful in the court depends upon whether the clause is reasonable. with employer and employee contracts it is assumed in law the employer has dominate influence ie an employee might feel pressured to sign a contract that is not fair. this is why to be successful the employer must show the clause is reasonable. how reasonable it is will depend upon how much risk there would be to the employers business by her breaking the clause. case law shows that the employer cannot effectively stop the person being able to work with one of these clauses.

I agree with this point... It could only be enforced if it is reasonable. Unless she runs off with the company client list and steals all their customers I struggle to see how this could be argued by any employer as a reasonable term in a contract of employment. I wouldn't worry too much about this.

Edited By: nickc74 on Jan 04, 2015 22:15
#12
She'll be working in a local shop. It worries me that it basically means that if she has the opportunity to get better pay or conditions from a different shop, then she'll be in breach of contract...

I work for Lidl, and I don't remember seeing anything like that in my contract (I will have to check though!) I'm pretty sure that if I wanted to, I could I could leave and go to Aldi (for example)...
#13
NeoDoug1
Cheers for the help guys! Here's the clause as stated in the contract :

Re: Non-Compete Letter

For good consideration and as an inducement for XXXXXXX LIMITED to employ XXXXXXX XXXXXXX the mentioned Employee in is obliged to respect the covenants contained in this Non - Compete obligation and the definitions in the schedule thereto.

Non-compete Covenant

The Employee hereby is obliged not to:
1) Directly or indirectly compete with the business of the Company and its associated companies during the period of employment and for a period of two years following termination of employment and notwithstanding the cause or reason for termination.
And
2) for a period of two years following termination of employment; directly or indirectly, whether on his/her own behalf or in conjunction with any person, company, business entity or other organisation whatsoever, solicit, assist in soliciting, accept, or facilitate the acceptance of, or deal with, in competition with the Company, the custom or business of any Customer or Prospective Customer with whom he/she has had substantial personal contact or dealings
on behalf of the Company during the period of employment.

This non-compete obligation shall extend only for a radius of 100miles from the present work place or any other company’s branch. The term "not compete" as used herein shall mean that the Employee shall not
own, manage, operate, consult or be employed in a business substantially similar to, or competitive with the present business of the Company or such other business activity in which the Company may substantially engage during the term of employment.

OMG was this contract written 150 years ago. A contemporary employment solicitor would be cracking up on reading this. There is so much ambiguity in this they would be laughed out of court ifthey tried to enforce it.
#14
surely a contract of employment is only valid whilst employed
#15
whatsThePoint
standard practice
Oh how the worm has turned








not in anyway sarcastic :D
banned#16
databar
whatsThePoint
standard practice
Oh how the worm has turned








not in anyway sarcastic :D

few of my comments are sarcastic, but because they are so sarcastic people tend to remember them and not other things I say ;)
#17
NeoDoug1
She'll be working in a local shop. It worries me that it basically means that if she has the opportunity to get better pay or conditions from a different shop, then she'll be in breach of contract...

I work for Lidl, and I don't remember seeing anything like that in my contract (I will have to check though!) I'm pretty sure that if I wanted to, I could I could leave and go to Aldi (for example)...


Even if the contract terms were enforced, it doesn't mean that she couldn't work within any shop within 100miles. It means any shop within the same trade. If this is a typical retail shop, from experience I would advise against querying the contract terms-they may well find a reason to withdraw the offer as she would be seen as an 'awkward one'.
#18
yeah, the EU would not allow this to be enforced, so no need to lose any sleep over it at all. it's a ridiculous bit of legalese, that really has no business being in there, unless you are a director or something.
#19
unless her position is very senior, i can't see a contract containing this clause. if she is a junior person then i would not accept this as it will mean she will not be able to work for another shop when she leaves.

looks very odd. is she going to be the sales director, partner or something?
banned#20
mutley1
unless her position is very senior, i can't see a contract containing this clause. if she is a junior person then i would not accept this as it will mean she will not be able to work for another shop when she leaves.

looks very odd. is she going to be the sales director, partner or something?

my friend used to work in a supermarket handing out food samples, she had the same sort of clause in her contract, she couldn't do the same sort of job elsewhere for 6 months after leaving, its a standard thing when you deal with customers or company info
#21
whatsThePoint
mutley1
unless her position is very senior, i can't see a contract containing this clause. if she is a junior person then i would not accept this as it will mean she will not be able to work for another shop when she leaves.

looks very odd. is she going to be the sales director, partner or something?

my friend used to work in a supermarket handing out food samples, she had the same sort of clause in her contract, she couldn't do the same sort of job elsewhere for 6 months after leaving, its a standard thing when you deal with customers or company info

that is odd. my brother used to work for sainsburys and asda and he never had this in his contract so he could go from one supermarket to the other.
banned#22
mutley1
whatsThePoint
mutley1
unless her position is very senior, i can't see a contract containing this clause. if she is a junior person then i would not accept this as it will mean she will not be able to work for another shop when she leaves.

looks very odd. is she going to be the sales director, partner or something?

my friend used to work in a supermarket handing out food samples, she had the same sort of clause in her contract, she couldn't do the same sort of job elsewhere for 6 months after leaving, its a standard thing when you deal with customers or company info

that is odd. my brother used to work for sainsburys and asda and he never had this in his contract so he could go from one supermarket to the other.

I'm not sure a night shift shelf stacker would need it tbh
#23
stuarthanley
Ive seen it in contracts before but, at the end of the day, if a contract has come to an end then the T&C's of that contract can no longer apply (basically, what can the ex employer actually do about it?)

Litigate against you for breach of contract.

Non-compete clauses are very common, and can easily be enforced.

http://www.lindermyers.co.uk/are-restrictive-covenants-enforceable/
#24
Those terms are seriously excessive - I doubt they would be upheld.
#25
I work dealing with employment law and although these are legal to be added to a contract, the law states that they also need to be reasonable.

Depending on the type of business and job your friend does, a tribunal would look weather the period of time is excessive or not. For instance a standard shop floor worker would have no impact to the business by moving from one shop to another. A merchandise director or MD would have an effect so it could be seen as reasonable that a non-compete is added.

Although unreasonable non-complete terms would not be enforceable, by singing the contract with the terms attached, you effectively agree to the clause and risk them being enforced should he/her leave.

if you need any further advice or guidance or would like any help drafting something to ask for the terms to be changed just PM me
#26
my husband has had similar to this in a couple of jobs. however he has worked in alot of similar companies and the previous employer has never taken action. he works in a particular area and so wouldnt be able to find another job.
#27
Q: Are restrictive covenants enforceable?

In general, if you rely on a one size fits all policy when drafting restrictive covenants, it risks them being unenforceable.

Certain restrictive covenants will be enforceable, if you are able to prove that they are:

reasonable
necessary to protect legitimate business interests; and
of a duration no longer than is necessary to protect those interests
However, they cannot be used as a restraint of trade. If you try to deny an employee the right to make a living in their chosen industry or profession, this will be taken seriously by the court. For example, an employment contract that imposes a blanket ban on a person working for a direct competitor, even for a short period of time, is unlikely to be enforced.

It is therefore important that restrictive covenants are carefully drafted. In the event that an employee challenges their restrictive covenant enforcement in court, you need to convince the court that the restrictions were sufficiently narrow so as to be properly enforced.

The extent of the restriction should also be relative to a person’s position in a business. For example, it can be acceptable for a senior employee with access to sensitive information to be subject to more heavy restrictions, as opposed to a junior employee with no access to sensitive information.


Q: What is reasonable?

What counts as a reasonable restrictive covenant depends on the nature of your business. However, by way of example, a restriction preventing a worker from soliciting your business or clients is more likely to be imposed than a covenant which simply prohibits contact with any customers or clients, many of which the employer may never have had contact with.

Similarly, a restrictive covenant preventing a person from working in the same industry within 10 miles of your premises is more likely to be enforceable than a covenant which simply prohibits them from working in the same industry within the UK, particularly if you do not have a UK wide presence.


Q: What is a legitimate business interest?

This is not intended to be an exhaustive list and a lot will depend upon the nature of your business.

However, restricting a person from working in an industry where they could damage your business by using information such as trade secrets, client database, details of pricing structures, tendering strategies etc (essentially any information that could cause serious damage your business if used it to provide an advantage to the new employer) may well be legitimate. This depends on whether it is reasonable and that the time period is no longer than is necessary to protect those interests.

It may also be legitimate to restrict a person from working for a competitor for a period of 6 months anywhere in the UK if you are a national sales director and have a presence all through the UK. However, it would not be legitimate for the same restriction to be applied to a junior sales assistant who only operates in one region.


Q: What is a reasonable duration?

It is rare that the court will enforce a restrictive covenant that lasts for over 12 months, unless there are exceptional circumstances.

Typically, the court would only impose restrictions of no more than 6 months, provided of course that they are reasonable and necessary to protect a legitimate business interest.


Q: When might a breach of contract be considered?

Even if you tick all the boxes for a restrictive covenant to be imposable, there are situations that can still render it void.

If you terminate a contract of employment in a wrongful manner, then this is technically in breach of contract. This means that any restrictive covenants contained within it are automatically void, even if they would otherwise be enforceable.

One common breach is making a payment in lieu of notice (i.e. paying notice period without a person working it) in the absence of an express contractual right to do so. In these circumstances, it is unlikely that any contractual restrictions could be enforced.

Bear in mind that this is not the case if a person resigns, rather than being dismissed. If they resign, they remain bound to the restrictive covenants.


Q: Are restrictive covenants just a deterrent factor?

Quite often restrictive covenants are inserted into contracts of employment, purely as a deterrent. However, when drafted up by our employment law solicitors, you can trust that they can be enforced properly and used to protect the interests of your business.


Q: What are common restrictive covenants?

Restrictive covenants can take many forms, but the most common restrictions are:

Non-compete – This type of restriction prevents a person from directly competing or working for a competitor, usually within a specific area (e.g. 10 miles of your employer’s premises) and/or for a specific period of time (e.g. 6 months from termination).
Non-dealing – This type of restriction prevents a person from working for your customers, clients and suppliers for a specific period of time (e.g. 6 months from termination).
Non-poaching – This type of restriction prevents a person from enticing staff away from the business, again usually for a specific period of time (e.g. 6 months from termination).

Q: What counts as confidential information?

While there is no specific restrictive covenant that deals with confidential information, an employee is under an implied duty not to use confidential information following the termination of their employment, whether by reason of resignation or dismissal.

Confidential information is usually defined in a contract of employment but typically includes client information, customer accounts, price lists and quotes for tenders.

However, you can’t prevent a person from using their “skill and knowledge”, even if they acquired the skill and knowledge whilst working for you. For example, if a person has been employed as a joiner and learnt a new method of joining two pieces of wood together, this would become part of their skill and knowledge, which they are free to make use of, even for a competitor.

It is understandable that you will want to protect your business interests. However, imposing unreasonable and more importantly unenforceable restrictive covenants should be avoided.


Q: What remedies are available?

If you believe an employee has breached their restrictive covenants, you can seek an injunction. An application is typically made for an interlocutory injunction pending a full trial, i.e. the court will attempt to put an immediate stop to what the employee is doing and hear the full evidence at a later date.

Whether or not an interlocutory injunction is granted will depend upon whether the court is satisfied that there is a serious question to be tried. That is, that the claim is not frivolous or vexatious and the so-called “balance of convenience” lies in favour of granting or refusing the interlocutory injunction. The court will consider:

whether damages would be a sufficient remedy at trial – this will not be the case where damages are unquantifiable, and/or where the employee may not have the means to pay them
whether more harm will be done by granting or refusing an interim injunction
where factors are evenly balanced, the court will favour preserving the status quo
any delay in making the application or acquiescence on the part of the employer; and
the conduct and dealings of the parties.
When you claim damages for breach of a restrictive covenant, you will need to show some loss resulting from the breach. This will normally be loss of profits on contracts or opportunities.

Often it is hard to prove that contracts or opportunities would have definitely been secured, had it not been for the breach. In such instances, the court is likely to evaluate damages based on the chances you have been deprived of. While assessing damages is not easy, the court is unlikely to use this fact to acquit the employee from paying damages for their breach.
#28
In short, I wouldn't worry about it.

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