Contract Clauses
Discussion
Possibly an interesting discussion opener, so wondered on people's thought...
Was recently offered a new role,the recruitment agent was very firm that abc company wanted me to hand my notice in asap...I declined until I received a copy of the contract.
Having received the contract I found the following clauses (some of which i've heard of in sales persons contracts but that is not my area)
Should I leave new role I would not be allowed to work for
a period of 12 months)
Any current suppliers or customers
Any previous (12 months) of the above
Any staff who've left within 2 years
Any potential suppliers or customers!!
Or any company who worked in a similar industry using the same base materials
A 'short term working clause'...due to their 'fluctuating order books'
A job title that had changed from interview to offer and a disclaimer of 'anything discussed at interview is over-ridden by this contract'
and so it went on....nedless to say I politely declined but is the above now becoming common??
Was recently offered a new role,the recruitment agent was very firm that abc company wanted me to hand my notice in asap...I declined until I received a copy of the contract.
Having received the contract I found the following clauses (some of which i've heard of in sales persons contracts but that is not my area)
Should I leave new role I would not be allowed to work for
a period of 12 months)Any current suppliers or customers
Any previous (12 months) of the above
Any staff who've left within 2 years
Any potential suppliers or customers!!
Or any company who worked in a similar industry using the same base materials
A 'short term working clause'...due to their 'fluctuating order books'
A job title that had changed from interview to offer and a disclaimer of 'anything discussed at interview is over-ridden by this contract'
and so it went on....nedless to say I politely declined but is the above now becoming common??
Doesnt matter if its common or not. You would have a case for restriction of trade against any company trying to enforce such clauses. Tend to find that such clauses are placed in contracts by HR people who think they are protecting the company when in reality what they are really doing is destroying the recruitment brand.
It's academic, as you have declined the job, but, if you CBA, post the precise wording of the covenant, and I'll tell you whether it looks enforceable or not. Ignore all bloke in pub advice about restrictive covenants (for example, the previous post). Such covenants are, nowadays, more often enforceable than not, but all depends on the precise wording and the business context.
craigjm said:
Doesnt matter if its common or not. You would have a case for restriction of trade against any company trying to enforce such clauses. Tend to find that such clauses are placed in contracts by lawyers who think they are protecting the company when in reality what they are really doing is destroying the recruitment brand.
Fixed that for you. You occasionally see some dodgy home made clauses drafted by some bloke, and even some old fashioned ones drafted by a lawyer ages ago, but those ones tend to fall over. In general, drafting an enforceable contract just requires the use of clear language, expressing what has been agreed, and no great magical skills, but in a field such as restrictive covenants it helps to be familiar with the current state of the art, by reference to the fairly substantial case law on the subject.
Goes a little something like this:
Clause: XYZ : employ or be employed by or enter into any business relationship with a Restricted Employee,customer or supplier within the Restricted Area
Clause: ABC : “Restricted ” means any person, firm or company who at any time during the ** months immediately preceding the end of your employment is or was a client or customer of the Company for the sale or supply of Restricted Services or Restricted Products or in the habit of dealing with the Company for the sale or supply of Restricted Services or Restricted Products and with whom you had personal dealings during the course of your employment.
and so it went on...I've obviously not written the exact clause numbers etc !!
Clause: XYZ : employ or be employed by or enter into any business relationship with a Restricted Employee,customer or supplier within the Restricted Area
Clause: ABC : “Restricted ” means any person, firm or company who at any time during the ** months immediately preceding the end of your employment is or was a client or customer of the Company for the sale or supply of Restricted Services or Restricted Products or in the habit of dealing with the Company for the sale or supply of Restricted Services or Restricted Products and with whom you had personal dealings during the course of your employment.
and so it went on...I've obviously not written the exact clause numbers etc !!
Is there a limitation as to the type of business that could be entered into? The restraint ought to be related to the kind of business in which the employee was employed. A restriction on any type of business would be too wide. What are the definitions of Restricted Services and Products?
How big is the Restricted Area?
How big is the Restricted Area?
It applied specifically to the industry I work within, which I found a bit much as if my current employer had such a clause the possible new employer would never have heard from me.
Without being too specific, my 'product area' is such a small industry that if i'd wanted to move i'd have to start from scratch..
Without being too specific, my 'product area' is such a small industry that if i'd wanted to move i'd have to start from scratch..
It is very difficult to advise further without knowing the precise business context and the precise wording of all parts of the clauses in question. I can explain the general principles that can be drawn from the case law, but each covenant has to be looked at individually, and in its precise business context. It may not be worth going much further, as the point is now academic anyway.
There are two views as what to do if offered a job on terms that include a restrictive covenant that you are advised is too wide to be enforced. One view is that you can sign up to it, more or less with your fingers crossed, on the basis that you have advice that the clause won't fly if launched. The other view is that you should not agree to anything that you do not intend to abide by. There is also the practical point that the employer, which has already shown that it is inclined to be unreasonable by seeking a wide restraint, might still try to enforce even a bad clause, and might get lucky with an errant Judge. At the very least, hassle and costs could be involved, even if you win the argument. I favour the second view, on principle, as well as on practical risk avoidance grounds. You can of course seek to negotiate a more sensible contract if you want the job.
There are two views as what to do if offered a job on terms that include a restrictive covenant that you are advised is too wide to be enforced. One view is that you can sign up to it, more or less with your fingers crossed, on the basis that you have advice that the clause won't fly if launched. The other view is that you should not agree to anything that you do not intend to abide by. There is also the practical point that the employer, which has already shown that it is inclined to be unreasonable by seeking a wide restraint, might still try to enforce even a bad clause, and might get lucky with an errant Judge. At the very least, hassle and costs could be involved, even if you win the argument. I favour the second view, on principle, as well as on practical risk avoidance grounds. You can of course seek to negotiate a more sensible contract if you want the job.
Gerard,
slightly off topic (sorry OP) but I was thinking if an employer succesfully uses a restriction in a contract to prevent you moving to a rival and that in itself leaves you unemployable/unemployed for X months because of the specific nature of your work or leaves you out of pocket because there would have been a salary increase due to the move is there (there isn't I know) or more correctly should there be a comeback on the original employer.
I appreciate you have entered into a binding contract and 'knew' of the restrictions when you signed that contract but it seems to me that if the existing employer wants to tie you to them and prevent you working elsewhere for X months then they 'ought' to be paying you gardening leave for that period. Seems only right to me (but will probably be proved wrong!)
I worked for a major insurer for 36 years and never once signed a contract! It was always implied.
slightly off topic (sorry OP) but I was thinking if an employer succesfully uses a restriction in a contract to prevent you moving to a rival and that in itself leaves you unemployable/unemployed for X months because of the specific nature of your work or leaves you out of pocket because there would have been a salary increase due to the move is there (there isn't I know) or more correctly should there be a comeback on the original employer.
I appreciate you have entered into a binding contract and 'knew' of the restrictions when you signed that contract but it seems to me that if the existing employer wants to tie you to them and prevent you working elsewhere for X months then they 'ought' to be paying you gardening leave for that period. Seems only right to me (but will probably be proved wrong!)
I worked for a major insurer for 36 years and never once signed a contract! It was always implied.
I am not quite sure what the last post means. Simply asserting that a clause is an unlawful restraint of trade is not necessarily an answer to such a clause. The employer can still persuade a court that the restraint is reasonable.
An employer is not bound to use garden leave and can instead use a post termination covenant. Some legal systems (Germany, for example) require that the employer makes a payment to the employee if a post termination covenant is to be upheld, but no such rule applies in the UK. Having said that, the amount that the employee was paid while working is likely to be a relevant factor in judging whether or not a restraint is reasonable. If a restraint is reasonable, then the employee has no claim to be compensated for its impact on him or her.
An employer is not bound to use garden leave and can instead use a post termination covenant. Some legal systems (Germany, for example) require that the employer makes a payment to the employee if a post termination covenant is to be upheld, but no such rule applies in the UK. Having said that, the amount that the employee was paid while working is likely to be a relevant factor in judging whether or not a restraint is reasonable. If a restraint is reasonable, then the employee has no claim to be compensated for its impact on him or her.
If a contract really would put someone out of work it should not usually be enforced, although sometimes this does happen. In pretty well every covenant case the employer exaggerates by saying that the departing employee will trash the business if the clause is not enforced, and the employee exaggerates by saying that he will starve, and little Johnny won't get the GI Joe with the Kung Fu Grip for his birthday if the clause is enforced. If I recall correctly, in Germany the employer has to pay at half the rate of the former salary in order for the employee to be held to a covenant. You sometimes see UK covenants with financial sweeties attached, especially at senior level.
Breadvan,
A quick question if I may.
My employer wishes to change working hours...8.15 start,instead of 8. 45 minute lunch break instead of an hour. I'm 100% ok with the changes as such, but the addition to the contract also references an email sent ut by the MD.
This email talks about group starts, group huddles etc. as it is referenced on the contract addendum is the email deemed part of the contract?
Thanks
A quick question if I may.
My employer wishes to change working hours...8.15 start,instead of 8. 45 minute lunch break instead of an hour. I'm 100% ok with the changes as such, but the addition to the contract also references an email sent ut by the MD.
This email talks about group starts, group huddles etc. as it is referenced on the contract addendum is the email deemed part of the contract?
Thanks
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