# Non-compete clause in employment contract



## Thomas_ (Mar 26, 2013)

Hi all,

I was recently approached by a competitor and am in the process of agreeing terms on a new position.  I've checked my existing contract, which states:


"You shall not for the period of twelve (12) months after the termination of your employment either on your own behalf or for any other person directly or indirectly carry on or be engaged (whether as a consultant employee or otherwise) or interested in any business within the United Kingdom which competes or is proposing to compete with the relevant business of the company or any associated company."

Anyone know if this is legally enforceable?  And what might happen if it went down the route of going to court etc? 

Any advice gratefully received.


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## el-ahrairah (Mar 26, 2013)

IANAE but i do believe that it can be enforced.  not sure what the outcomes might be.


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## Errol's son (Mar 26, 2013)

I had one that said I could not approach any clients of my former employer for six months after leaving, either working for myself or working for a competitor.  I complained about this clause and they said that even if I did there was bugger all they could do.  I guess if I had pinched a huge client and taken lots of projects away to my new employ they may have tried some legal shenanigans.

The best thing to do in my opinion is to get a lawyer to review the contract and advise you or, if you can't afford that, show your contract to your new employer and ensure that they will be liable, not you, if things go awry (unless of course you have lied about your current salary, then you will have to get your own legal advice).


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## Errol's son (Mar 26, 2013)

The term compete is very broad.

For instance, if your current employer does market research for FMCG companies and your new employer does market research for airlines, you are competing in the same market but with different client types.


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## pseudonarcissus (Mar 26, 2013)

I think they would have to demonstrate that they suffered loss, so if you did take their best client with you they could sue you for the lost profit. If the new employer has their own clients you would be working with I think that would be difficult to prove. They would presumably tick the "would not be considered for re-employment" box which would make references difficult in the future.
Go have a chat with the personnel department to explain you will not be directly competing with the same client list and therefore you consider yourself to have complied, but just be ready to leave the building without going back to your desk.


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## TruXta (Mar 26, 2013)

cesare will know a lot more about this.


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## rubbershoes (Mar 26, 2013)

Clauses like that are very common.  12 months is a long time and would be OK for senior management

But covering the whole of the UK? That wouldn't stand up.  It's preventing you from earning a living and so would fall foul of the Unfair Contract Terms Act 1977


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## Thomas_ (Mar 26, 2013)

Errol's son said:


> I had one that said I could not approach any clients of my former employer for six months after leaving, either working for myself or working for a competitor. I complained about this clause and they said that even if I did there was bugger all they could do. I guess if I had pinched a huge client and taken lots of projects away to my new employ they may have tried some legal shenanigans.
> 
> The best thing to do in my opinion is to get a lawyer to review the contract and advise you or, if you can't afford that, show your contract to your new employer and ensure that they will be liable, not you, if things go awry (unless of course you have lied about your current salary, then you will have to get your own legal advice).


 
Thanks, I think consulting a lawyer might be my best option.  Any ideas how one might go about finding one?  Google?


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## TruXta (Mar 26, 2013)

Thomas_ said:


> Thanks, I think consulting a lawyer might be my best option. Any ideas how one might go about finding one? Google?


cesare is a pro (not a lawyer, but employment expert), get in touch with her and I'm sure she can recommend you someone very good indeed.


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## Thomas_ (Mar 26, 2013)

rubbershoes said:


> Clauses like that are very common. 12 months is a long time and would be OK for senior management
> 
> But covering the whole of the UK? That wouldn't stand up. It's preventing you from earning a living and so would fall foul of the Unfair Contract Terms Act 1977


 
Thanks, everything I've read seems to suggest that is the case, however both employers are in London and I'd have a hard job arguing they're not competitors if I was asked to.


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## equationgirl (Mar 26, 2013)

Thomas_

As rubbershoes has pointed out, clauses such as these (restrictive covenants) are very common but must be reasonable. An individual cannot be prevented from earning a living under the clause so preventing you from working in the UK is unlikely to hold up in a court of law. I don't know how senior you are currently in the business, but as a rule of thumb the more senior you are the more onerous the provision.

Here are some links to reputable lawyers that may help you get more information:
http://www.out-law.com/page-7086
http://www.employmentlaw.co.uk/restrictive_covenants.asp

Here is a recent case law summary on restrictive covenants - the clause was held unenforceable because 12 months was deemed too long to keep someone out of employment.
http://www.doyleclayton.co.uk/thoug...to-enforce-12-months-non-competition-covenant

I am not saying that your situation is exactly the same as this. It depends on the nature and seniority of your employment - one thing that the courts look at is how much access to confidential information you have, for example.

I hope this helps


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## FridgeMagnet (Mar 26, 2013)

They're called "Restraint Of Trade" clauses, and they're potentially legal, but not just on the grounds of competition. They have to be protecting a "legitimate business interest" and be only as restrictive as is strictly necessary. As for what interests can mean, http://www.inbrief.co.uk/regulations/restraint-of-trade-clauses.htm gives examples of


> Relationships with clients
> Connections with third parties who may be essential to the business such as suppliers
> Employees
> Trade secrets
> Confidential information



The example that you give at the top seems over-broad to me (though IANAL etc). As a freelancer I've seen a couple of contracts which have had similar - they tended to be straight imports from US boilerplate, and I was advised by other people that they wouldn't stand up here, which is good as they'd have meant I was basically unable to work for a year or two. In the one case I wanted to sign anyway I asked for it to be removed, and it was.


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## pseudonarcissus (Mar 26, 2013)

I think you should ask for a year's salary as a golden handshake, then I am sure you would willingly not compete and restrict your working activities to light gardening


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## ymu (Mar 26, 2013)

Don't they have to offer 'gardening leave' for the period if they want to enforce it? My brother was paid to sit on his arse for months when he left a job in a very restricted marketplace.

E2A: x-post!


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## pseudonarcissus (Mar 26, 2013)

pseudonarcissus said:


> I think they would have to demonstrate that they suffered loss, so if you did take their best client with you they could sue you for the lost profit. If the new employer has their own clients you would be working with I think that would be difficult to prove. They would presumably tick the "would not be considered for re-employment" box which would make references difficult in the future.
> Go have a chat with the personnel department to explain you will not be directly competing with the same client list and therefore you consider yourself to have complied, but just be ready to leave the building without going back to your desk.


Going through Equationgirls useful link:
Where an employer claims a financial remedy or damages for breach of a restrictive covenant in an employment contract, the employer will need to show some loss resulting from the breach. This will normally be loss of profits on contracts or opportunities diverted by the employee.

I'm in an odd situation where I have shares in the company; if I leave I must sell them. I get next to nothing if I am a "bad leaver", I make a healthy profit if I am a "good leaver". Taking a job with a competitor would probably make me bad, but it's a specialist field, so who else would employ me? Good leavers retire, die in service, are fired and win an employment tribunal, or leave by "mutual consent". Not a very nice situation.


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## Fruitloop (Mar 26, 2013)

I had a chat about these with my brother once on my own behalf and he said that occasions where restraints of trade were successfully argued in court were the exception rather than the rule. I think the three examples he gave were where the relationship with a particular person was key (i.e. they took all their big accounts with them to a competitor), where there was obviously direct competition (like they set up shop next door) or where it could be argued that the field was so globally limited that even though they weren't next door they were in competition (IIRC I think the example of the last was gun-makers).

In my field (software) they have been on pretty much every contract I've signed, and yet I've never heard of an example where they were enforced, although I have known a few people kept on indefinite gardening leave to stop them going elsewhere - which kind of implies that the employer didn't think they'd get far going down the legal route.


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## ymu (Mar 26, 2013)

Indefinite gardening leave is a pretty good outcome.


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## Pingu (Mar 26, 2013)

FridgeMagnet said:


> They're called "Restraint Of Trade" clauses, and they're potentially legal, but not just on the grounds of competition. They have to be protecting a "legitimate business interest" and be only as restrictive as is strictly necessary. As for what interests can mean, http://www.inbrief.co.uk/regulations/restraint-of-trade-clauses.htm gives examples of
> 
> 
> The example that you give at the top seems over-broad to me (though IANAL etc). As a freelancer I've seen a couple of contracts which have had similar - they tended to be straight imports from US boilerplate, and I was advised by other people that they wouldn't stand up here, which is good as they'd have meant I was basically unable to work for a year or two. In the one case I wanted to sign anyway I asked for it to be removed, and it was.


 

^^ this

the restrictions have to be both reasonable and actually protecting trade to be realistically enforceable. also taken into account is if there is a restriction on YOUR trade that impedes on you ability to work. so if you work in a very niche field then the restrictions may be seen as unreasonable if they mean you cant work for an extended period etc.

In My (limited) experience anything over 3 months is hard to enforce unless you are senior management or a sales guy


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## Pingu (Mar 26, 2013)

ymu said:


> Indefinite gardening leave is a pretty good outcome.


 

depends

for someone like me it would seriously hurt my future work prospects. I need to be in contact with people to keep my industry knowledge up to date in a very fast moving field so I would much prefer to be paid off


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## ymu (Mar 26, 2013)

You'd have to make sure 'indefinite' meant 'forever', of course.


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## Fruitloop (Mar 26, 2013)

Yeah the worry would be that you'd reach a point where you were no use to anybody and then they'd drop you. The guy I knew in that position had done awesome stuff in the open source world though and really raised his profile - everyone outside the company used to marvel that he could do all that and his day job too, ho ho ho.


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## equationgirl (Mar 26, 2013)

I think it's more that the employer has a standard template contract regardless of the role.


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## cesare (Mar 26, 2013)

Thomas_ said:


> Thanks, everything I've read seems to suggest that is the case, however both employers are in London and I'd have a hard job arguing they're not competitors if I was asked to.



The point here isn't so much that they're not a competitor - but that the covenant Is too widely drafted to be enforceable. Also that competition and business are strictly defined so that de minimis competition isn't included. It's only potentially enforceable if it only goes as far as is necessary to protect the company's legitimate business interests.

Were you given separate consideration for agreeing to that clause? More likely to be enforceable if you were given something for it.

Is there a garden leave clause? Garden leave should run concurrently with restrictive covenants often reducing the length if they put you on garden leave throughout notice.

Is there a blue pencil clause enabling any unenforceable provision to be severed without affecting the meaning of the remaining promise?

What other post termination restrictions are there eg confidentiality?

Do any of the restrictions mention new employer and making them aware of the restrictions? Edit: and does the new employer make you contractually responsible for making them aware of post termination restraints from your previous employer?


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## cesare (Mar 26, 2013)

Pingu said:


> depends
> 
> for someone like me it would seriously hurt my future work prospects. I need to be in contact with people to keep my industry knowledge up to date in a very fast moving field so I would much prefer to be paid off


Absolutely. Garden leave clauses are unlikely to be enforceable if they're long enough that the employee's skills start to atrophy.


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## nadia (Mar 26, 2013)

Essentially the Bosman ruling, once you are out of contract ie notice served they cannot stop you plying your trade


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## Pingu (Mar 28, 2013)

nadia said:


> Essentially the Bosman ruling, once you are out of contract ie notice served they cannot stop you plying your trade


 
not strictly true.

if you agree to a perfectly reasonable restrictive covenant then it forms part of a contract between you and your (ex) employer. who can then sue you for breaching that contract and any damages they feel they have suffered as a result of the breach if you flout it.

the reasonableness test though is one I see most restrictive covenants falling short of.

for example I have a 12 month one in my current role that pretty much bans me from working anywhere in the world in any data related role.. which I was more than happy to sign - good luck in enforcing that one chaps.. fill your boots.

however had it been for 3 months and mentioned stuff like "for companies I had dealt with whist with my current employer in the 6 months immediately prior to my departure and within specific technology areas" I am fairly certain that were  then to leave and work for a say O2 looking at their data governance programme and using metadata hub to do so they would quite successfully sue my arse off.


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## cesare (Mar 28, 2013)

Pingu said:


> not strictly true.
> 
> if you agree to a perfectly reasonable restrictive covenant then it forms part of a contract between you and your (ex) employer. who can then sue you for breaching that contract and any damages they feel they have suffered as a result of the breach if you flout it.
> 
> ...



Plus potentially sue, say O2, for inducing you to breach the covenant. Yes, it does happen.


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## Thomas_ (Apr 2, 2013)

Thanks for the replies here, very much appreciated. 

One concern is that they take me to court, even if the clause isn't enforceable, just so I incur costs etc.  It wouldn't be unlike them them to go down this route.....

I'm speaking with a solicitor today.

Cheers


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## Pingu (Apr 2, 2013)

courts very very much do not like having their time wasted.. so if its pretty obvious that its unenforceable then a court would take a very dim view of anyone trying to pursue it


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## equationgirl (Apr 2, 2013)

Thomas_ said:


> Thanks for the replies here, very much appreciated.
> 
> One concern is that they take me to court, even if the clause isn't enforceable, just so I incur costs etc. It wouldn't be unlike them them to go down this route.....
> 
> ...


Hope it went well.


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## grit (Apr 2, 2013)

Bit late on this one, but I've never seen a non compete that was anything other than a complete fantasy on the part of the company that drafted it.


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## shakespearegirl (Apr 3, 2013)

Yep, bit late too.. I work in a very niche area of a niche market and I've had companies try to get me to sign these. I've taken legal advise and they are unenforcable as they'd restrict my ability to earn a living, although I've always been advised to make the companies remove them..


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## Sarah Mcfairy (Oct 15, 2013)

Hi all,

I have a non-compete clause in my contract too and wanted to see if this would hold up if I were to move to a direct competitor? It seems really vague as I cannot see a time limit i.e a 3 month or 6 month clause but only specific reference to the 'continuance of your employment'? Does anyone have any idea if this would be enforceable by my current company? Any help offered would be great!

"You shall not during any continuance of your employment with the Company be directly involved in any work with or for any person, firm or company which is engaged in business in competition with the Company, regardless of any relationship in place prior to employment with the Company, with any person, firm or company which is now engaged in business with the Company?"


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## Maurice Picarda (Oct 15, 2013)

That seems designed to address moonlighting with a competitor rather than joining one.


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## Sarah Mcfairy (Oct 15, 2013)

Hi Silas, I just sent you a private message on this as I dont want to overexpose myself to a potential sneaky employer checking up on me! Hope thats okay


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## Maurice Picarda (Oct 15, 2013)

I quite understand, especially as you have a rather distinctive name which would come up on a google search sharpish.


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## sim667 (Oct 15, 2013)

Silas Loom said:


> That seems designed to address moonlighting with a competitor rather than joining one.



The wording basically means "don't cheat on us without splitting up with is first"


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## Sarah Mcfairy (Oct 15, 2013)

Silas Loom said:


> I quite understand, especially as you have a rather distinctive name which would come up on a google search sharpish.


Thanks Silas, I was more concerned with them searching the net for their clause and for them to find this....it does seem to be a cut and paste job and you were right in the fact that they are a small company! therefore likely to have scrimped on the legal fees to get the contract right in the first place. Thanks!


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## equationgirl (Oct 16, 2013)

Sarah Mcfairy said:


> Thanks Silas, I was more concerned with them searching the net for their clause and for them to find this....it does seem to be a cut and paste job and you were right in the fact that they are a small company! therefore likely to have scrimped on the legal fees to get the contract right in the first place. Thanks!


If it's a small company, it's not beyond the realms of possibility for them to have just done a web search for a template contract or bought a standard contract from a legal document supply company.

It's a clause about moonlighting for a competitor whilst working for them. It's not a restrictive trade clause, in my non-legal opinion.


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## free spirit (Oct 16, 2013)

Sarah Mcfairy said:


> Hi all,
> 
> I have a non-compete clause in my contract too and wanted to see if this would hold up if I were to move to a direct competitor? It seems really vague as I cannot see a time limit i.e a 3 month or 6 month clause but only specific reference to the 'continuance of your employment'? Does anyone have any idea if this would be enforceable by my current company? Any help offered would be great!
> 
> "You shall not during any continuance of your employment with the Company be directly involved in any work with or for any person, firm or company which is engaged in business in competition with the Company, regardless of any relationship in place prior to employment with the Company, with any person, firm or company which is now engaged in business with the Company?"


that just means that while working for company x you can't also do any work on the side for any other company involved in the same industry.

Nothing there to stop you moving across to work for a competitor, just don't start work while still using up your holiday time or something.


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## Puddy_Tat (Oct 16, 2013)

Sarah Mcfairy said:


> Hi all,
> 
> I have a non-compete clause in my contract too and wanted to see if this would hold up if I were to move to a direct competitor? It seems really vague as I cannot see a time limit i.e a 3 month or 6 month clause but only specific reference to the 'continuance of your employment'? Does anyone have any idea if this would be enforceable by my current company? Any help offered would be great!
> 
> "You shall not during any continuance of your employment with the Company be directly involved in any work with or for any person, firm or company which is engaged in business in competition with the Company, regardless of any relationship in place prior to employment with the Company, with any person, firm or company which is now engaged in business with the Company?"



subject to the disclaimer that i'm not a lawyer either, but I'd take "the continuance of your employment with the company" to mean the time you're employed by them.

in other words, you're not allowed to 'moonlight' - and you might be on dodgy ground if you had a load of holiday while you were working out your notice, and started a new job while on that holiday.

but once the contract of employment comes to and end, i can't see an issue.


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## fuck seals (Oct 16, 2013)

i have always has restrictive covenants in my contract, and they have never been acted upon when breached.


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## equationgirl (Oct 16, 2013)

fuck seals said:


> i have always has restrictive covenants in my contract, and they have never been acted upon when breached.


For the most part, it's a) because the employee weren't that high up the tree and b) it's not worth the expense to the company to enforce the clause.

But for a specialist role or for a director it can be worth it.


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## fuck seals (Oct 16, 2013)

equationgirl said:


> For the most part, it's a) because the employee weren't that high up the tree and b) it's not worth the expense to the company to enforce the clause.
> 
> But for a specialist role or for a director it can be worth it.



indeed, i agree.  for the most part they are there as a deterrent/ threat rather than as a reality.  in fact the only time i can think of it being used is when a cto moved from one software house to another, which backs your case.


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