Restrictive Covenant - Graduate Position

[MClowes]

Hi guys,

I'm desperate for some advice regarding an issue with my current employer which has me pretty worried. I graduated this year with an Automotive Engineering degree and commenced employment with an Electrical Engineering firm who are fairly local to me. Now, this company supply wiring harnesses to a number of British automotive manufacturers, one of which I worked for as an intern during my degree course. My current role is a graduate engineer role supplying wiring harness to the same manufacturer I interned for, at their production facility. I've been with the company for 4 months now and I feel it just isn't for me, I want to be working in a more mechanical setting than electrical, similar to my internship. As such, I have recently accepted a position as a HVAC (Heating, Ventilation and Air-Conditioning) Development Engineer, where my focus will be on researching and developing future technologies aimed at improving cabin air quality and reducing vehicle emissions. This will involve me working for the manufacturer where I was an intern, and whom my current employer supplies.

When considering this role I examined my contract which contains the following restrictive covenant:

"On the termination of your employment you will not for a period of 6 months from the date of termination (whether directly or indirectly), either on your own account or as a representative or agent on account of or on behalf of any other person, firm or company or organisation:

1. Enter into an employment contract or otherwise provide services to:-

• Employer 1
• Employer 2
• Employer 3
• Employer 4

who are direct competitors or customers of CURRENT EMPLOYER in a similar capacity."

My assumption with regards to this clause was that as my prospective new role is so different to my current one, the HR department would simply accept my resignation and would allow me to leave on good terms. On the advice of my friend who is a solicitor (in a different field), I included with my resignation a letter highlighting the differences in the job role and the fact the the contract restricts working for this customer "in a similar capacity", and as such I would not be in violation of this post-termination clause.

It has since transpired that HR will not play ball and have since issued me with a letter accepting my resignation, but also indicating their intention to take the matter further with regards to my prospective employment with their customer and violation of my contract, citing that they have legitimate business interests and trade secrets to protect. I'm now terrified that I'll be leaving my current role only to be hit with an injunction preventing me from starting this new role.

My questions therefore are these: could my employer reasonably have an injunction granted against me? When the job role is so different, can the restrictive covenant genuinely be protecting my employers business interests? When I have only been working for the company for such a short period of time and in such a junior position, with absolutely no access to sensitive business information, is there really any legitimate business interest for them to protect?

Finally, where do I go from here? I don't have the money to pay for legal advise having just bought a house, what are my other options?

Cheers guys, any help will be hugely appreciated.

[Viking1985]

Re: Restrictive Covenant - Graduate Position

"On the termination of your employment you will not for a period of 6 months from the date of termination (whether directly or indirectly), either on your own account or as a representative or agent on account of or on behalf of any other person, firm or company or organisation:

1. Enter into an employment contract or otherwise provide services to:-

• Employer 1
• Employer 2
• Employer 3
• Employer 4

who are direct competitors or customers of CURRENT EMPLOYER in a similar capacity."
[/I]
I included with my resignation a letter highlighting the differences in the job role and the fact the the contract restricts working for this customer "in a similar capacity", and as such I would not be in violation of this post-termination clause.

When the job role is so different, can the restrictive covenant genuinely be protecting my employers business interests? When I have only been working for the company for such a short period of time and in such a junior position, with absolutely no access to sensitive business information

Hi,

Question. Why, when you know you have a clause in your contract (that you chose to sign) restricting future employment with A NAMED COMPETITOR did you go and accept the new job WITH THAT COMPETITOR and resign, THEN seek legal advice?

You had money to buy a house. But not enough to buy expertise.

Thing is, firms DO have legitimate interests to protect and they have named specific firms they want to avoid secret information going to. Could the new firm have recruited you in order to gain that info from the other area you used to work in? No? What would you say if your new boss instructed you to "spill the beans?" The duty of Faithful Service is to your NEW employer: refusing could get you sacked and then what of your mortgage?

You risk ruin. Don't make promises you might choose to break: it's a big bad world out there.

Viking

[MClowes]

Re: Restrictive Covenant - Graduate Position

I did not have any funds at the time to pay for any legal advice, which is why I approached a freind of mine to look over my contract, who highlighted that the contract states "a similar capacity". I also felt I had the understanding of the HR department that the roles were completely unrelated which is why I chose to accept the new role. They now seem unwilling to discuss this part of the contract with me and have threated to pursue the matter further.

What constitutes"a similar capacity"? Can they really prohibit me from any kind of work for this customer?

[PAWS]

Re: Restrictive Covenant - Graduate Position

Em, that’s a bit harsh!
I will ask the dynamic @Kati who the best beagles are to advise on this and I am sure they will be able to give you some sound advice when they get a chance.
Sorry -I was posting at the same time as you!

[PAWS]

Re: Restrictive Covenant - Graduate Position

I’ll try [MENTION=51026]Ula[/MENTION] -seems to be pretty fantastic at this sort of thing

[Kati]

Re: Restrictive Covenant - Graduate Position

I’ll try @Ula -seems to be pretty fantastic at this sort of thing

I was just going to tag her and [MENTION=26290]mariefab[/MENTION] xx

[PAWS]

Re: Restrictive Covenant - Graduate Position

Thank you Angel!

[MClowes]

Re: Restrictive Covenant - Graduate Position

I'm not sure if it is of any relevance, but the position I have applied for is also a Graduate role, so another very junior position.

[ULA]

Re: Restrictive Covenant - Graduate Position

For a restraint to be reasonable in the interests of the parties it must afford no more than adequate protection to the party in whose favour it is imposed, in this case your employer and they would need to prove that the restriction did no more than the minimum necessary to protect their legitimate business interest.

A restrictive covenant is not necessarily about the job you do but the wider company information that you have been party to whilst working with your employer, which is clearly what they are concerned about from what they have said in the letter to you accepting your resignation. So you need to understand that trying to prove you are doing a different job is not enough.

From your employer's side enforcing restrictive covenants can be fraught with difficulties because cases are determined on the fact-specific nature of each case which means that there is no certainty as to which covenants will or will not be upheld by the Courts. The course of action for your employer is to seek an interim injunction from the Court which stops or prevents you from breaching the covenant e.g. restricting you to commence the new job. Alternatively, they can seek damages for breach of covenant particularly if they can attribute loss to the breach of a covenant. They can potentially sue your new employer if they feel the new employer had induced you to breach your contract of employment with them. The usual course of action to this approach would be for your current employer writing to the new employer to put them on notice that this is the case, before pursuing action directly against you employee and new employer.

It sounds from what you said about your employer "indicating their intention to take the matter further with regards to my prospective employment with their customer and violation of my contract, citing that they have legitimate business interests and trade secrets to protect" that they are considering this latter course of action.

[MClowes]

Re: Restrictive Covenant - Graduate Position

Does the argument that the contract clearly states that it restricts working for these customers in a "similar capacity", and the job I have applied for is dissimilar, hold any water?

Furthermore, how can one prove that I am not privy to any information that could be used to undermine my current employer? I have met with nobody other than my direct colleagues and those from the customer, who's site we work on. I have not visited any of our production facilities and the work I have been carrying out has been nothing but menial tasks. I've not even had any formal meeting with any of my management team, not had any individual targets set, which has been part of the reason I want to leave, so I am hardly integrated into the business.

[ULA]

Re: Restrictive Covenant - Graduate Position

As I have no knowledge of your industry I cannot advise on whether the two jobs differ enough to not be in a "similar capacity".

If they do try to stop you working for your new employer then it will be down to your current employer to prove to a Court that the restrictive covenant is reasonable and thereby be able to enforce it.

An assessment of the reasonableness of a restriction will usually involve a Court considering the following:

1. the nature and suitability of the restraint provided by the restriction
2. the geographical ambit of the protection afforded by the restriction (not applicable in your case as there is not geographical restriction)
3. the duration of the effect of the restriction
4. whether a lesser form of restriction would provide sufficient protection

They may just be "sabre rattling" with your new employer bearing in mind they have a commercial relationship.

[Viking1985]

Re: Restrictive Covenant - Graduate Position

They may just be "sabre rattling" with your new employer bearing in mind they have a commercial relationship.

Hi Ula and other Beagles,

Can we help this Graduate Engineer best by assuming this is an empty threat OR assuming they WILL SUE HIM and therefore lose him his home?

1. They NAMED THE RIVAL SPECIFIC COMPANIES THEY WOULD NOT COUNTENANCE him working for.

He took a job with them.

2. He asked HR and they THREATENED HIM with legal action.

OK, you may see the old employer as the Big Bad Wolf but WE won't get bit. They may have lots of other "Innocent Red Riding Hoods" looking on, seeing if they will get sued if they leave with company secrets...

When will this threat be taken seriously? On injunction? When the guy is in the High Court? Will WE VOLUNTEER to represent him?

No. Thought not.

Two ideas for the OP to consider.

1. Back off. Now. Fast. Far. Clearly. Put it down to experience. Tell the new employer you've been "scared off" by the possibility of legal action but would they take you on in 6 months. Go to your family and friends, tell them you need some financial help. Get a job in McDonalds, Tesco wherever for 6 months. Tell the old employer they got their way and you won't work for the firms you promised not to work for when you signed your contract.

2. Take a chance they won't sue the hell out of you. After all, risking your home is far better than the embarrassment of having to admit you have made a series of errors...

Viking