Restrictive covenants

Halle71

Does anyone have any experience of restrictive covenants?

My husband is looking to move jobs and he has a restricitve covenant that I think may be unenforceable.

From what I understand, they have be 'fair and reasonable steps to protect your business' and with this in mind, should either be short (6-12 months) and can then be fairly broad, or longer (2 years for exampe), but have to be very specific so as not to disadvantage the employee.

In a nutshell, his says "he agrees not to undertake provision of the same service/products for a period of two years"

From what I have read this is unlikely to be enforceable, and, if it isn't, would this mean that the covenant would be null and void or could it be enforced more fairly - ie. could it be reduced to six months and then be enforceable? Again, I suspect not as this new version would not be in the contract he has signed.

Undervalued

Halle71 wrote: »

Does anyone have any experience of restrictive covenants?

My husband is looking to move jobs and he has a restricitve covenant that I think may be unenforceable.

From what I understand, they have be 'fair and reasonable steps to protect your business' and with this in mind, should either be short (6-12 months) and can then be fairly broad, or longer (2 years for exampe), but have to be very specific so as not to disadvantage the employee.

In a nutshell, his says "he agrees not to undertake provision of the same service/products for a period of two years"

From what I have read this is unlikely to be enforceable, and, if it isn't, would this mean that the covenant would be null and void or could it be enforced more fairly - ie. could it be reduced to six months and then be enforceable? Again, I suspect not as this new version would not be in the contract he has signed.

This is a highly complex area. You are going to have to seek specialist advice and, even then, it is only an (hopefully expert) opinion as to what a judge may decide.

From a practical point of view, are his new employers prepared to take advice and consider indemnifying him against any possible claim? They too could face a claim for knowingly enticing him to breach his contract.

If not then other risks surface. Regardless of what the final outcome may be, many new employers will simply walk away if threatened by the former employer's solicitor. Unless his talents are so unique then the easy answer is to dismiss him and get somebody else.

If his skills are that unique and desirable it vastly increases the chances of the covenant being enforceable.

It is impossible to say from the limited information here whether it would be unenforceable in his particular circumstances. It may be, but that does raise the question of why did he sign a contract if he was not willing to stick to it?

macca1974

I'd agree that you should get legal advice from an expert in this matter. Having said that, I was always under the impression that there was a conflict between this type of clause within a contract and your right to earn a living (thats not the proper phrase). I always thought that they were usually restricted at 6-12 months and it was more to do with not contacting existing customers rather than not being able to do the job at all. But it is a complex area and some legal advice would be the way forward.

Undervalued

macca1974 wrote: »

I'd agree that you should get legal advice from an expert in this matter. Having said that, I was always under the impression that there was a conflict between this type of clause within a contract and your right to earn a living (thats not the proper phrase). I always thought that they were usually restricted at 6-12 months and it was more to do with not contacting existing customers rather than not being able to do the job at all. But it is a complex area and some legal advice would be the way forward.

I'd agree that superficially the terms the OP has outlined seem excessive (although that is without knowing the field of work or what her husband actually does).

However, as I alluded, in some ways the bigger question is how far his current employer's are likely to push it.

Two extremes....

He may be advised that, in his circumstances, the covenant is likely to be enforceable but the former employer either can't be bothered or isn't willing to risk the cost.

or

He may be advised that it is excessive and most likely unenforceable but the former employer fights tooth and nail against both him and his new firm. What then? Does he have the resources (both financial and mental) to fight a long battle. Or will his new employer cut him loose to protect themselves.

No easy answer.

Halle71

Thank you for your replies.
I knew it would be complicated but guess I just wanted to get a top line viewpoint while we decide what to do next, which will be to get legal advice.

Undervalued - he doesn't want to leave his current job. It's pretty much his dream job that he has been doing for 10 years with unprecedented success in this area (medical sales), and he planned to stay until we move abroad. But things have changed. It's a whole new thread, but his boss has reneged on some (albeit verbal) promises, and my husband is about to put in a formal complaint about his line manager following an abusive incident last week. This resulted in him actually picking up the phone to someone who has been trying to meet him for a number of months but who he has been putting off - he's just had enough.

Crazy_Jamie

On the face of it that term looks like to be unenforceable, both because of the time scale and because of the failure to specify a geographical area. The description of the prohibited conduct may also have been drafted too widely. However, Undervalued is quite right when he says that there is insufficient information to advise definitively, and even if there was sufficient information this is not the sort of issue that you should be seeking advice for on an internet forum. You need to find a specialist solicitor and seek their advice after providing them with all of the necessary information.

In terms of your question about whether the term could be enforced more fairly, Judges can apply the 'blue pencil' test, which broadly speaking means that they can remove sections of a clause, but not amend them. So for example, in your case the Judge could potentially remove the word 'products' if that resulted in it being unnecessarily wide, but couldn't reduce the two year period down to one year. However, the circumstances in which the 'blue pencil' test can be used and the ways in which it can be used are also a matter for specialist advice, not an internet forum.

On a final note, Undervalued's point as to the practical implications of getting into a dispute like this is very well made. Being right or wrong in disputes such as this is often secondary to how the dispute practically plays out, and the practicalities can (and often do) influence the approach of the parties more than the principle. Whoever advises you about the enforceability of the covenants will also be able to advise you as to the practicalities of the situation, but it is certainly something that you need to keep in mind.