Does this Employment Contract Clause Prohibit a Side Business?

[HaydR]

Hi I'm employed full time and looking for advice on interpreting a clause within my employment contract.

I want to start a side business, where I'd become the sole director of a Ltd company. I wanted to know whether the clause below could cause an issue?

"You shall not work for anyone else while you are employed by the Company without our prior written approval."

The way it's worded sounds like it's specific to acquiring a second job / employment contract, rather than directing a Ltd company? I want to avoid mentioning anything to my employer if possible!

Any advice would be much appreciated. Thanks,
Hayden

[atticus]

Being a director of a limited company can contravene this clause. The question is what you will be doing, not what it is called.

[HaydR]

Thanks for your response!

I'll be offering a consulting service.
I assumed that as I won't strictly be 'employed' by 'anyone else' and won't have a contract etc. in place, this clause would not apply?

Thanks

[atticus]

The wording is not to "work for" anyone else. Read it.

[HaydR]

Yes, it states I shall not be 'employed' by anyone else. As a director, I will not be employed by anyone.
From what I've read, unless there is a employment contract or service contract in place, I won't be an 'employee'? Hence my question

[Huxie]

You will be working for someone else, a limited company, of which you will also be a director.

[HaydR]

Hi,

Just to reiterate the wording states ‘employed by’ not ‘working for’. I won’t be ‘employed by’ anyone else.

I think even if the wording were ‘work for’, I still wouldn’t be working for anyone else. I’d be directing a company and not employed by it.

[atticus]

According to the OP, the clause in question says

"You shall not work for anyone else while you are employed by the Company without our prior written approval."

[HaydR]

Yes! Sorry I stand corrected!

Still, I will not be working for ‘anyone’ else?

[atticus]

What work will this directing involve?

[HaydR]

Business development and consulting - no employment or service contract in place, sole director & no salary.

[atticus]

To me, that appears to be "work", and therefore to come within the ambit of the clause.

[HaydR]

Yes I’d agree that it would be ‘work’. I’d argue however that it is not for ‘anyone else’?

[Huxie]

So would this work attract renumeration?

[HaydR]

Yes it would, but I would not be paying myself a salary for the foreseeable.

Please see below, an extract I've referenced from a HR professional website. According to this text, it looks like I'd be an 'office holder' since I wont have an employment contract, nor will I have a service contract in place?

"An ‘employee’ is defined under section 230 of the ERA as “an individual who has entered into or works under (or, where the employment has ceased, worked under) a contract of employment.” The ERA defines a ‘contract of employment’ as “a contract of service or apprenticeship, whether express or implied, and (if it is express) whether oral or in writing.”

As an office holder, a director does not automatically qualify as an employee. However, the mere fact that someone is a director of a company is no bar to that individual entering into a contract to serve that company. Directors aren’t usually provided with employment contracts, although they may be operating under a service contract. A service contract generally sets out terms which would otherwise be contained in a standard employment contract, along with additional duties relating to the director’s role as an office holder."