restraint/non-compete clause

[fifi]

Hi everyone
My first post so please be gentle!
I am currently employed by the UK's largest distributor in a particular field and have been with the company for several years. Due to changes in working practice and personnel plus related issues in my personal life I have decided that it is time for the parting of the ways. Here's the problem...I have a restraint clause in my contract that states I cannot work for the competition in any capacity for 6 months after terminating my employment with them. When I first started with the company the restraint clause listed 2 competitors this has since increased to 17 and effectively left me nowhere to go other than to a competitor if I wanted to change jobs. I signed previous contracts and although I was not entirely happy with the restraint clause I did not envisage wanting to leave the company anyway. Things change and I have now been offered a position with a competitor (albeit with the company who I consider the least 'threat' to my current employer) but my present company is now playing 'hardball' and saying that it will invoke the restraint clause if I decide to hand in my resignation formally. The official line is that if they allow me to leave to a competitor then it opens the floodgates for other employees to follow suit. My argument with this is that a few years ago one of my colleagues (who I am still in touch with) left the company to go to the same competitor and was simply asked to work a month's notice in the warehouse. Also a senior manager was allowed to leave because it was found that he had not actually signed his contract. Has this not already set a precedent?
The present company has a habit of issuing contracts fairly regularly - maybe once or twice a year (usually to include another competitor on the restraint list or to amend the postcode areas covered by a particular sales area). These contracts are usually headed and dated for a designated period eg 1st January - 30th June or 1st February - 31st December. I asked the company to forward me my most up-to-date signed contract and they have sent one dated 1st June 2010 - 31st January 2011! Other colleagues in equal positions were asked to sign one dated June 2011 - December 2011. I suspect that they meant to send me this to sign but forgot to change the dates - would this be a get-out that the only signed contract I have is 12 months out of date? As regards knowledge of the business - I am not involved in any strategic planning decisions or party to any pricing structure. I do have knowledge of discounts offered as incentives and customer base but these are not likely to change if I am out of the market for 6 months and as the postcode areas are relatively new to me my knowledge of that customer base is not complete or exclusive. I really wish I had the courage to just hand in my notice and take my chances but realistically I cannot afford to be out of work for 6 months or face a costly court case. Please, please any advice would be much appreciated.

[Guest]

Re: restraint/non-compete clause

Your contract stands as you last SIGNED IT, and it must have REVOKED any previous contract you signed. Amendments must be SIGNED in the same way as the original contract it amends.

The answer you are looking for is in the contract itself.

[fifi]

Re: restraint/non-compete clause

Sorry I'm still not clear with this...so the fact that I have not received and signed the LATEST contract which has been provided to other colleagues (as the dates had been left on the one sent to me from a previous contract) means that the LAST contract I did sign is considered as my current contract and is enforcable? If so basically I am screwed and will have to remain with my current employer until I retire!Could I insist that I receive an up-to-date contract (albeit only dated until the 31st December 2011 - the same as my other colleagues) but then refuse to sign it?

[Guest]

Re: restraint/non-compete clause

Could I insist that I receive an up-to-date contract (albeit only dated until the 31st December 2011 - the same as my other colleagues) but then refuse to sign it?

Try it.

[labman]

Re: restraint/non-compete clause

In the UK, restraints of trade are restrictions on free trade or limitations on the individual liberty of traders to buy or sell freely. They are usually contractual clauses (strictly speaking, a contract is not required) that go too far to limit competition, as in your case.


Restraints of trade are a fetter on freedom of contract - it is the policy of the law that traders are free to select with whom they contract and anything that impedes that free selection is void on public policy grounds unless it is reasonable and in the pubic interest.


Restraints of trade seek to protect the goodwill, trade secrets of a business and/or competitors poaching staff by former employees. Where restrictive covenants are unnecessary or merely capable of enforcement in an oppressive manner (actual oppression need not be proved), they must be proved to be reasonable before a court will enforce them.

[fifi]

Re: restraint/non-compete clause

Thank you - so does the fact that they have already allowed employees to move to competitors set a precedent in your opinions?

[labman]

Re: restraint/non-compete clause

If the work you do does not give you privileged information which could be passed on to creditors, then whether or not previous cases have set a precedent is irrelevant. The clause would be unenforceable at law.

If they were taken into consideration, the person with the unsigned contract would not, IMO, set a precedent as the contract was unsigned. The other employee may set a precedent, but whether this could be used against them or not I don't know.

At the end of the day, the critical thing is that as long as you hold no 'trade secrets' to pass on to competitors, then they would find it exceedingly difficult to enforce the clause because it would fall under Common Law of Contract, and would almost certainly be unenforceable.

[fifi]

Re: restraint/non-compete clause

Would 'trade secrets' have to be defined and proved? The only privileged information I am party to is discounts offered to retail customers and the prices of our products. Of course I have product knowledge and a retail customer base (but anyone can look up retailers in the yellow pages!)

[fifi]

Re: restraint/non-compete clause

Look, thank you for your comments - I have taken other legal advice too and it would seem that basically unless I am prepared to call their bluff and chance that they will actually not follow through with legal proceedings then I am stuck with them. I do not think I will be signing any new contract however.

[labman]

Re: restraint/non-compete clause

Best of luck. At least you've been through a learning curve, which is never a bad thing.

I still think it would not have been enforceable, but there's always that chance that they'd follow through and try, which at the end of the day is something only you can decide about.

[fifi]

Re: restraint/non-compete clause

Sorry, me again - if the company decides to terminate my contract (maybe through redundancy, restructure or sacking) would the 6 months restraint clause still apply and how can I find out if the company has previously been litigious at all?

Also if I do not sign a new contract is the old one still valid?

Thanks again

[labman]

Re: restraint/non-compete clause

To put your mind at ease over the litigation issue, would it be helpful to pop to a solicitor who specialises in Employment Law - most give at least 30 minutes free.

A quick Google of 'restraint clauses' would, I imagine, bring up solicitors sites which will hopefully reinforce what I've said as well. Unless you have privileged information, they will not be able to enforce this. They are, in my opinion, using scare tactics. It is a commonly abused piece of legislation.

I don't know how you'd find out if they have ever tried to litigate using this, sorry.

As far as the clause standing if they dismissed you, terminated your contract etc... it would still stand if it held water.

[fifi]

Re: restraint/non-compete clause

You are right and that's what I've decided to do for my own peace of mind - I just think that the fact they have basically eliminated all the competition in the restraint clause is too much and means I cannot realistically seek employment within my own field. I'll let you know what happens..

[charitynjw]

Re: restraint/non-compete clause

Fwiw, I reckon the employer is trying to impose a 'global' restraint (by listing all possible competition), & disguising it as a reasonable one.

There is the view that, if they tried to enforce this, & lost, it would free all other employees from this onerous condition.

You could suggest to them to put you on 'garden leave' for 6 months - a reasonable request which, if refused, could be mentioned in court.

[Crispybacon]

Re: restraint/non-compete clause

Hi Fifi

Is what you are referring to whats known as a 'restrctive covenant'?

I went through this exact scenario with a previous employer a couple of years ago and was not meant to work for a competitor for a period of 6 months. But after taking legal advice I did take employment with the competitor and my employer did nothing.

As always with these things the devil is in the detail.

If your employer has a lazy HR department (which many have) then its likely they have tried to enforce a 'blanket' covenant within all contracts for all employees which is the same for the CEO as it is to the cleaner.

Restrictive covenants (as explained to me by my solictor) should not be applied generically to contracts of employment but have to specific to individuals roles and responsibilities and the sensitivity of the commercial information you have access to.

A covenant should be 'reasonable' in respect to your current employers right to protect its interest while at the same time it should not prevent your right to trade.

The fact that your employer has named 17 companies it does not want you working for could be considered too restrictive and unreasonable.

The only way they could enforce this would be to test the contract by taking it to court.

Depending on your notice period, the chances are that by the time this happened, you would be working for your new employer anyway, and they would have to argue that the covenant is reasonable.

From my understanding the only times this has been successful is in cases such as a hairdresser who has been an apprentice and then opened a salon within a couple of miles of where they trained, and senior executives who have jumped ship.

It depends on your role, but from what you've said so far I think you would have nothing to worry about.

Best
Crispy