Restrictive Covenants contract help

[charlieivy]

Hi, I am after some advice regarding Restrictive Covenants on my employment contract. I would be very grateful if someone could advise me. Please read below my situation and the clauses on my contract. Thanks

[ostell]

Business on the forum is not conducted by PM, you state your problem fully on the forum, suitably redacted if required.

[charlieivy]

Apologies, I will do that now

[charlieivy]

I have been approached and accepted a new role with one of my current employer’s clients. I have not told my current employer who I am going to work for but they are questioning whether I am in breach of any of the clauses highlighted under the Restrictive Covenants section of my contract.

Prior to November 2019 I was working for a company which then went into a Joint Venture with my current employer. My contract with my old employer was TUPE’d over to my current employer but I have not signed a new employment contract with them. The company who I am now hoping to work for was an existing client of my old employer before the Joint Venture. I am not sure if this makes a difference to whether the Restrictive Covenants are still valid?

I will mention that my new employer approached me as they are building their own internal team so there would be no future work available for current employer anyway regardless of whether I left or not.

[charlieivy]

15. RESTRICTIVE COVENANTS

15.1 In order to protect the confidential information, trade secrets and business connections of the Company to which you have access as a result of your employment, you covenant with the Company that you will not:

15.1.1 either during your employment or for 6 months after the termination of your employment (“Termination”), solicit or endeavour to entice away from the Company the business or custom of any customer or client with whom you have had business dealings on behalf of the Company within the last six months of your employment or the last six months or your employment prior to the commencement of any period of Garden Leave with a view to providing goods or services to that customer or client in competition with any business carried out by the Company; or

15.1.2 either during your employment or for 6 months after Termination in the course of any business concern which is in competition with any business carried out by the Company, offer to employ or engage or otherwise endeavour to entice away from the Company any senior employee of the Company, or an employee with technical knowledge or experience, or an employee for whom you were responsible at any time during the last six months of your employment or the last six months of your employment prior to the commencement of any period of Garden Leave; or

15.1.3 either during your employment or for 3 months after Termination, be involved in any capacity with any business concern which is (or intends to be) in competition with any business carried out by the Company in which you were involved at any time during the last three months of your employment or the last three months or your employment prior to the commencement of any period of Garden Leave; or

15.1.4 either during your employment or for 6 months after Termination, be involved with the provision of goods or services to (or otherwise have any business dealings with) any customer or client with whom you have had business dealings on behalf of the Company within the last six months of your employment, or the last sixmonths of your employment prior to the commencement of any period of Garden Leave in the course of any business concern which is in competition with any business carried out by the Company; or

15.1.5 for 6 months after Termination, canvass, solicit or approach or cause to be canvassed, solicited or approached any person who was a supplier of goods or services to the Company with whom you had business dealings on behalf of the Company within the last six months of your employment or the last six months of your employment prior to the commencement of any period of Garden Leave with a view to persuading them to cease or reduce their supplies to the Company; or

15.1.6 for 6 months after Termination approach any person who was negotiating with the Company for the supply of goods or services by the Company during the last six months of your employment or the last six months or your employment prior to the commencement of any period of Garden Leave and with whom you had business dealings on behalf of the Company during such period; or

15.1.7 at any time after Termination, represent yourself as connected with the Employment in any capacity.

15.2 Any breach of any of the restrictions set out in clause 15.1 above during your employment may lead to disciplinary action being taken against you and may lead to your dismissal.

15.3 The restrictions imposed on you by this clause 15 apply to you acting:
15.3.1 directly or indirectly; and
15.3.2 on your own behalf or on behalf of, or in conjunction with, any firm, company or person.

15.4 The periods for which the restrictions in clause 15.1 apply shall be reduced by any period that you spend on Garden Leave immediately prior to the termination of your employment.

15.5 If you receive an offer to be involved in a business concern in any capacity during your employment, or prior to the expiry of the last of the covenants in this clause 15.1 you will give the person making the offer a copy of this Statement [and shall tell the Company the identity of that person as soon as possible after accepting the offer].

15.6 You have had the opportunity to take legal advice regarding the restrictive covenants set out in this clause 15 and you agree that each of the restrictions in this clause 15 is intended to be separate and severable. If any of the restrictions shall be held to be void but would be valid if part of their wording were deleted, such restriction shall apply with such deletion as may be necessary to make it valid or effective.

[ULA]

This Restrictive Covenants (RC) if it was in your contract with your old employer which when you were TUPE'd across will remain in effect unless you have signed any new contract with different RC terms.

You say this was a client of your old company, how long ago is it since your prospective new employer has done any business with either your old company or the new joint venture company.

[charlieivy]

This Restrictive Covenants (RC) if it was in your contract with your old employer which when you were TUPE'd across will remain in effect unless you have signed any new contract with different RC terms.

You say this was a client of your old company, how long ago is it since your prospective new employer has done any business with either your old company or the new joint venture company.

Thanks for clarifying that.

The current employer are currently at the end stages of the contract won by my old company. Once the contract has finished there will be no more business from the client (my prospective new employer) due to client building their own inhouse team which will not have to rely on any external resources.

[charlieivy]

By they time I start working for the client, the contract will have finished.

[ULA]

Although there does not appear to be a clause directly about becoming employed by a competitor business or a client (which is unusual since all other bases for this type of clause are covered) I think you may have a potential problem with clause 15.1.4.

By joining the client as an employee your company could argue that you will be providing services "to (or otherwise have any business dealings with) any customer or client with whom you have had business dealings on behalf of the Company within the last six months of your employment". This restriction is valid for 6 months after your termination.

15.3 and 15.3.1 does refer to the restrictions being applicable by you acting directly, which being employed by the client is a direct action.
15.5 requires that a copy of this clause is provided to your prospective new employer in order that they can satisfy themselves that they are not going to be "brought into" a potential issue over RCs between you and your current employer.

Do you now whether your employer know that the contract once concluded is "lost" whether or not you join the client?

[charlieivy]

I have no idea I’m afraid.

[ULA]

Ok.

In my opinion you need to consider my comments in #9 in regard as to how your company may interpret the RC's in relation to your move to a client.

[charlieivy]

Thanks, am I right in saying a RC is not enforceable unless the company can prove it’s had a direct loss of earnings as a result of my departure?

[ULA]

RC's are not just about direct loss of earnings they are also about protecting the confidential information, trade secrets and business connections of the company.

You may be able to defend any possible claim by your employer, given what you have said, it sounds like potentially regardless of whether you joined the client or not they are taking the work "in-house", so it is unlikely further contracts would be awarded to the company you work for. This counters the financial loss argument, which just leave the others I have outlined above.

Also it depends on the appetite of your company to go down a potentially costly legal route for which the initial stage would be an injunction to stop you starting work with the client.

[charlieivy]

Thanks your help has been invaluable. Do you think I should acknowledge their request to confirm that by working for my new employer I would not be in breach of the clauses? It seems like they are out to trap me? Do I have any obligation to reply?

[ULA]

Have they acknowledged your resignation, confirmed leaving date etc?
Was their request to confirm you are not in breach of the RC's in writing or just verbally requested?