Restriction clause on multiple employment or other business - reasonable or not?

[R0b]

Hi Ula

I was hoping to pick your brains on a clause in an employment contract that I've not seen before, maybe it's because I am out of touch but just seems a a tad too restrictive.

Here's the clause.

You may not, without prior written consent of the Company engage, whether directly or indirectly, in any business or employment outside your hours of work for the Company. Consent will generally not be withheld unless there is likelihood that your performance may be unreasonable impaired through fatigure, or there may be a potential conflict of interest.

I can see the point about performance being affected and conflict of interest but to simply have a blanket ban not only on employment but any other business seems to go one step too far (though I see the not unreasonably withheld but still it is subject to their consent). For example, that would preclude the employee from doing any voluntary work or if the employee was on the board of a local management committee etc.

How would this clause affect the employee if they already have committed engagements before taking up this employment role i.e. doing some separate consultancy work unrelated to the company's industry?

If considered unreasonable, is it now worth negotiating or perhaps simply leaving it be and then challenging it if and/or when the issue arises.

[ULA]

Hi rob I have seen similar clauses in contract, I include them in ones I draft, albeit not worded in the same way but the rationale is the same.

When I include such a clause it is in fact to do with the Working Time Regulations 1998 and ensuring that a member of staff is not, by being employed elsewhere, working more than 48 hours per week, o

ver a reference period.

If permission were to be granted for a "second employment" that did not conflict with the first employer's business then I would expect that the individual would be required to sign an opt out agreement. Even given that I would expect the employer to reserve the right to withdraw permission should the second job be impacting on the person's ability to perform their primary job.

I would suggest that if the clause is likely to affect the employee now, then in by book honesty is always the best policy so they need to raise it now. If not then then if they are thinking of taking on a second job, consulting, in the future then they need to raise it at that time with their employer.

My only thought on it being a bit tough is whether this covers volunteering activities such as a scout/guide leader or being on a board of governors etc. so, if that is the issue then again best get clarification. For me something like that would not be an issue I would just ask for a rough estimate of likely time spent on these activities and take a practical view on it.

[R0b]

Thanks Ula, there is in fact a separate clause saying that the employee agrees to opt out of the WTR and if they wished to opt in, then notice would need to be given.

So if the clause is intended to relate to the WTR but that is already covered off elsewhere, does that change the landscape? I understand the employee does voluntary work from time to time but has also been offered some consultancy work from their former employer in the future (a separate industry) and did not want to jeopardise this.

As I read the clause it sounds like a mix of non-compete and a restraint of trade. I can understand the non-compete as that falls in line with protecting the legitimate interests of the company e.g. the usual ones such as trade secrets, poaching employees, competitors etc. but the example about whether the additional work might be impact performance, surely that would be a performance related-issue and so the company should follow their capability processes and not, as the clause suggests, apply a blanket restriction on the employees right to use their skills and trade elsewhere.

It just seems to be drafted wider than necessary and goes beyond protecting the legitimate interests of the company whilst severely restricting what the employee can do outside of company hours.

Let me give the example of a friend of mine who on occasions helps some of their friends out doing gigs and ticketing at festivals around the UK. Alot of the time my friend helps out last minute i.e. on the day of the festival (usually weekends) for a little extra cash. If that friend was in the positon of the employee under this contract, it would mean that my friend could not do that work on the wekeend because of the restriction in the contract.

I guess what I want to know really is whether this is open to challenge or is there sufficient case law that confirms this is an acceptable position to take. To me, there seems to be an unfair imbalance between the company and the employee.

[ULA]

If there is a separate clause that states the employee agrees to opt out of WTR then that would be in relation to that employment only so does not change the landscape.

The first part of the clause is

You may not, without prior written consent of the Company engage, whether directly or indirectly, in any business or employment outside your hours of work for the Company.

So, yes the employee could take up employment outside business hours but they would need the consent of the employer first.

The second part of the clause then continues to say that the company is more than likely to allow this to happen except in circumstances where they think the person could potentially work too may extra hours, probably on a regular basis thereby potentially impacting the health and safety of that individual or their ability to perform the job they are paid to do. Then as you point out there is the conflict issue which an employer does need to cover off.

So in practical terms with regard to your example all it would need is for the person to just let his employer know that is what happens on odd weekends during festival season and can they consent to it. My view is that a reasonable employer will say this is ok. However on the other hand someone maybe working in a bar 5 nights a week every week - on top of their normal job a reasonable employer may have a concern about the person becoming too tired and therefore not be able to perform their job to the fullest extent and for which they are being paid.

To be honest I have been writing this type of clause into contracts since even before the WTR and it is often a standard term in many an employment contract.

[R0b]

Thanks Ula.

Fully understand your points and they are taken on board, it's just surprised me that I've not seen a clause requiring consent from the employer when engaging in any form of business or employment. I'm just not sure that the excuse of fatigue is a sufficient legitimate interest when balanced against the rights of the employee to earn a living, even more so in a generation where it seems more people are taking on second jobs to keep their heads above water.

Appreciate you saying you've drafted these types of clauses but I must admit I've never had one like this in any one mine. Granted I have a restrain of trade clause for the duration of my employment not in relation to the usual 4 or 5 legitimate interests but never something as wide as this - not to mention its subjective. I wonder if its simply there as a deterrent more than anything else.

Anyway, this is just academic for the time being, the employee hasn't started the job yet so probably best not to rock the boat and raise the issue as and when it arises. Hopefully by then the employee-manager relationship will be better and maybe more amenable to doing outside work.

Thanks again.