Restrictive covenant - employee advice

MK_Hunter

Hi guys,

In advance, thanks for any help you may be able to offer. I’ve been pretty naïve here in my 23 years of existence. I’m currently on hold with CAB hoping they might be able to offer some advice, but wanted to ask here also.

I am an employee on a graduate scheme with a distribution company, during my time here I have worked in two specific roles across a few industry sectors. Specifically for the last 12 months (the period which the covenants cover) I have spent 6 months working as a credit controller for one part of the business, and the second 6 months working in a sales admin support capacity – discussing with limited customers some products and selling prices,and doing a lot of work on complete customer lists and updating the CRM with sales prices.

As I came to the end of the scheme, and having not enjoyed sales, I elected to move into a different role within the company as a purchasing assistant. But due to timings and locations, the interview for the role doesn’t take place till well after my two year contract ends and I leave the area, so I would be leaving the company regardless – so I interviewed for a purchasing assistant role with one of our competitors who offered me a job.

As I handed in my notice with my current company, they drew my attention to my contract and the restrictive covenants, which they’ve kindly summarised;

“You cannot go and work for a competitor for 3 months after termination date; this would also apply if we gave you the required one month notice.”

“You cannot contact any customers of suppliers of XXXXXX for 6 months after the termination date. These are customers or suppliers that youhave been in contact with 12 months prior to your termination date”

I wasn’t aware I was breaking any contract obligations when I applied and accepted the new job, and I guess I was pretty naïve.

My arguments against the restrictive covenants are I’ve worked in sales admin, I will now work in purchasing. I will have no contactwith any customers of either business. I have had no contact with any suppliers of the current business – whilst the two businesses are in the same sector, my roles don’t involve a transfer of competition knowledge. Further, I am a graduate with limited exposure to company information; I do not and cannot access information such as buying prices or supplier lists.

I’ve got the full clause available to supply if necessary,but to advise its some 1500 words long.

Any idea on how enforceable these clauses are?

cazziebo

There is a myth that these clauses are unenforceable; they very much are.

However, they are standard (as in they will be included in all employee contracts) and a company will know which employees represent a real risk to the business when they move on. From what you've said, you represent very little risk to your current employer so I'd say you're pretty safe.

Congratulations on the new job.

Funky_Bold_Ribena

Depends on so many things, but I'd say to them that the clause they have summarized means that I can't work at all and that is not fundamentally not fair so it may well be non-enforceable. Also, the job role and information that you could take is not relevant and as there is no distance it means you couldn't work anywhere in the world and that is definitely not fair!

http://www.out-law.com/page-7086

Takeaway_Addict

Funky_Bold_Ribena wrote: »

Depends on so many things, but I'd say to them that the clause they have summarized means that I can't work at all and that is not fundamentally not fair so it may well be non-enforceable. Also, the job role and information that you could take is not relevant and as there is no distance it means you couldn't work anywhere in the world and that is definitely not fair!

http://www.out-law.com/page-7086

I disagree, the covenant is concise and reasonable and not open ended with the exception of the distance, I would guess the competitior is within the same area so this would become moot. I would believe the employer would have success in upholding this if they wished.

It is not preventing the employee from working, it is preventing the employee working in the same industry as the current employer for a short period of time to protect the companies assets.

MK_Hunter

Thanks for the responses guys!

I was on such a high over the weekend after being offered the new job and in a city I love, and then this morning have felt pretty defeated. But your responses strike me as the common sense approach, taking into consideration my experience, my position, my significance in the company my access to information and what information could be damaging.

Ideally I really want to leave on good terms so am going to do my best to achieve this. The companies are number 1 and number 2 in the industry so there is every chance that in the future, I could end up back applying for a role with my current company.

Undervalued

cazziebo wrote: »

There is a myth that these clauses are unenforceable; they very much are.

I would agree about 80 or 90 percent with this.

However to say, based on a forum post, "they very much are" is perhaps a bit sweeping. It would depend on the scope of the clause, the nature of the business and a whole number of other factors whether a court would find it reasonable and proportionate. It is a complex area and really needs specialist advice.

As to whether a particular company would actually seek to enforce their rights, even if they could, is another question!

TBagpuss

is there a specific manager you get on well with? It may be that you could negotiate a waiver to the time limit to allow you to take up the new role. I would expect them to be much more concerned about the second part of the clause, about poaching.

MK_Hunter

Thanks for your help guys, its clear I need some official legal advice even if its just a "what if" situation. As yet there has been no official line about appealing for an injunction (from research that looks to be the process), they've just asked all the details and job spec to assess and review.

I've never had to enlist the services of a solicitor before, I'm not even sure how to go about it.

A few of my managers, who I deal with in person have said they'll urge the business to take a common sense approach to it, accepting that I am currently customer facing where as in the new role I won't be and that I have no knowledge of suppliers/BIP's in the current company.

getmore4less

You can't give any information about the new job to the current employer.


Bottom line is if the new employer won't back you up you are out of a job as they will be included as a co party in any legal and will drop you if they don't want to get involved.

MK_Hunter

Thanks guys, as it all happened yesterday, I'm waiting on some official legal advice, but also waiting to here back from my current company on what decision they are making.

It makes me wonder how people normally go about moving companies within the same industry, do they really just sit around unpaid for 3 months for these periods to expire?

The industry I'm in, like most industries I imagine, is quite incestuous and several people who I currently work with previously worked for the new company and vice versa. As this is only my first and second job, it's proving to be a difficult moment, and certainly makes me wonder about what happens in the future.