Restrictive Covenants. Any experiences?
Discussion
When I re negotiated my contract last year, against my will and under a lot of duress, I was forced to sign a restrictive covenant saying that I could not work in the same industry for six months after leaving. Naturally I'm looking to move on now and just wondered if anyone has any experience with restrictive covenant and breaking them. I've been told that they're 'not worth the paper they're printed on' but I also understand that they can lead to a lot of fruitless legal legal action.
Please advise.
Please advise.
If they are too wide ranging then they can be considered as preventing you from finding alternative employment, which is a nono under EU law.
So - if like me you have an EMEA wide clause that you won't work for a competitor for 6 months, that's difficult to make stick as it's restricting your ability to find work.
If you have a 3 month clause that you won't work for ABC corp or that you won't take any customers with you, that is generally something that could be made to stick.
There's quite a famous example in the IT industry of someone who left XYZ to join ABC, but then XYZ found out and went legal. Sadly for Mr IT, he had a US contract - apparently this made a lot of difference!
So - if like me you have an EMEA wide clause that you won't work for a competitor for 6 months, that's difficult to make stick as it's restricting your ability to find work.
If you have a 3 month clause that you won't work for ABC corp or that you won't take any customers with you, that is generally something that could be made to stick.
There's quite a famous example in the IT industry of someone who left XYZ to join ABC, but then XYZ found out and went legal. Sadly for Mr IT, he had a US contract - apparently this made a lot of difference!
rickf_uk said:
I've been told that they're 'not worth the paper they're printed on'
That depends entirely on what your particular covenants seek tp prevent you from doing, how widely they're drafted and whether they effectively amount to a restraint of trade.If they're drafted too widely, they CAN be unenforceable. You shouldn't assume that that is the case, however.
The key phrase in document appears to be that I will not act as agent, employee, or partner
"in a company for the supply of any product or service provided by the company or which the company would be able to supply or provide, and with whom the employee has had material dealings in course of his duties."
As we are a wholesaler who can supply anything from controlled drugs to gluten free cakes that seems a pretty wide remit.
As it happens I am not looking at a situation where I would be taking existing customers with me as I am looking at moving to a different sector but within the same general industry.
I don't have any company secrets to take with me and have no intention of taking any of the staff with me.
"in a company for the supply of any product or service provided by the company or which the company would be able to supply or provide, and with whom the employee has had material dealings in course of his duties."
As we are a wholesaler who can supply anything from controlled drugs to gluten free cakes that seems a pretty wide remit.
As it happens I am not looking at a situation where I would be taking existing customers with me as I am looking at moving to a different sector but within the same general industry.
I don't have any company secrets to take with me and have no intention of taking any of the staff with me.
The company I work for tried to slip this into our contracts, as well as adding some malarkey about intellectual property.
There was some fuss kicked up, and many refused to sign it. The whole idea seemed to just fade away, I've no idea how many people did sign it though.
The irony is that not long after this was banded around, a new person was employed at middle-management level and given a rather nice golden handshake so the company could make use of his knowledge and contacts. Turns out one of the main things they wanted from him was intellectual property of his previous employer, so he can't actually use it and his knowledge.
What legal action could be taken against someone if they breached one of these contracts though?
There was some fuss kicked up, and many refused to sign it. The whole idea seemed to just fade away, I've no idea how many people did sign it though.
The irony is that not long after this was banded around, a new person was employed at middle-management level and given a rather nice golden handshake so the company could make use of his knowledge and contacts. Turns out one of the main things they wanted from him was intellectual property of his previous employer, so he can't actually use it and his knowledge.
What legal action could be taken against someone if they breached one of these contracts though?
Brigand said:
What legal action could be taken against someone if they breached one of these contracts though?
The nuclear option would be to apply for an injunction to prevent the employee taking up the job, or to prevent them from doing the things prohibited by the covenant. I've seen this happen, the new employer get threatened with proceedings as well and then withdraw the offer or even terminate the new employee if they had already started.
Or possibly just a claim for damages.
Take immediate expert advice. Do NOT rely on internet blather or bloke in pub wisdom.
Restrictive covenants are regularly enforced against employees and the cost of litigating over them, successfully or not, can run into six figures. I know this because I conduct such litigation, for employers and for employees.
The clause as quoted above appears to make no grammatical sense, and I wonder if it has been quoted correctly, but in any event you need proper advice before you act.
Restrictive covenants are regularly enforced against employees and the cost of litigating over them, successfully or not, can run into six figures. I know this because I conduct such litigation, for employers and for employees.
The clause as quoted above appears to make no grammatical sense, and I wonder if it has been quoted correctly, but in any event you need proper advice before you act.
rickf_uk said:
The key phrase in document appears to be that I will not act as agent, employee, or partner
"in a company for the supply of any product or service provided by the company or which the company would be able to supply or provide, and with whom the employee has had material dealings in course of his duties."
As we are a wholesaler who can supply anything from controlled drugs to gluten free cakes that seems a pretty wide remit.
As it happens I am not looking at a situation where I would be taking existing customers with me as I am looking at moving to a different sector but within the same general industry.
read this with interest rick. I have no real input regarding the covenants issue, but the company I work in is in exactly your line of work.
I don't have any company secrets to take with me and have no intention of taking any of the staff with me.
"in a company for the supply of any product or service provided by the company or which the company would be able to supply or provide, and with whom the employee has had material dealings in course of his duties."
As we are a wholesaler who can supply anything from controlled drugs to gluten free cakes that seems a pretty wide remit.
As it happens I am not looking at a situation where I would be taking existing customers with me as I am looking at moving to a different sector but within the same general industry.
read this with interest rick. I have no real input regarding the covenants issue, but the company I work in is in exactly your line of work.
I don't have any company secrets to take with me and have no intention of taking any of the staff with me.
There was a thread (see below) on this a while ago where I went into a bit more detail on the law on restrictive covenants. The thread was regarding a hair stylist, so a very different sector, but the principles as to whether your covenant is enforceable remain the same.
Any restrictive covenant of this kind may only extend to what is reasonable to protect the legitimate business interests of the employer and which does not constitute what is known as an "unlawful restraint of trade" against the employee. Whether it does or not depends on a range of factors.
Thread - http://www.pistonheads.com/gassing/topic.asp?h=0&a...
A bit more information might help with figuring out whether your RC is enforceable or not. What geographical area does the covenant apply to? What is the geographical spread of your current/former employer's business and the area you dealt with? You've said that you're moving to a company working in a different sector - does your new employer deal with any goods with which you have had material dealings in your previous job? How long do you think would it take for your current/former employer to replace you and any customer base you have built up once you leave? Could you possibly post up the entire restrictive covenant (or the salient points thereof)?
Any restrictive covenant of this kind may only extend to what is reasonable to protect the legitimate business interests of the employer and which does not constitute what is known as an "unlawful restraint of trade" against the employee. Whether it does or not depends on a range of factors.
Thread - http://www.pistonheads.com/gassing/topic.asp?h=0&a...
A bit more information might help with figuring out whether your RC is enforceable or not. What geographical area does the covenant apply to? What is the geographical spread of your current/former employer's business and the area you dealt with? You've said that you're moving to a company working in a different sector - does your new employer deal with any goods with which you have had material dealings in your previous job? How long do you think would it take for your current/former employer to replace you and any customer base you have built up once you leave? Could you possibly post up the entire restrictive covenant (or the salient points thereof)?
Breadvan72 said:
Well, that posting certainly helped advance the sum of human knowledge. Cheers for that!
er yes, slightly screwed up the format of that quote.Nevertheless, despite pointing out I would not be able to provide input in regards to covenants, my humble apologies that it failed to life up to your expectations
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