10 year restrictive covenants/conditions

up4thecup

Hi all,

I wonder if anyone could offer their advice/thoughts on an issue I have. I've been at a company for the last 10 years and worked my way up to a decent level. However, I'm very ambitious and have been exploring my options in terms of leaving and going it alone. I'd even started drafting a business plan, discussed it with friends and family, as well as friends who run their own business.

The plans were coming together nicely until I dug out my contract and confidentiality agreement which I signed way back in 07/08. I was shocked to see they had placed a 10-year restrictive covenant which looks like it's going to put a spanner in the works.

It states a period of 10 years from the termination of employment and covers trade secrets, operations, processes, plans, intentions, product info, know-how, market opportunities, prospects/leads, etc...

I've done some reading on this and companies that include these restrictions tend to put in 6 months or so, so 10 years seems a bit excessive, especially considering this is all I have done for pretty much all my adult life (now 32), to be honest I feel a little trapped. I worked for myself when younger, albeit a different industry and would love the challenge of doing it again, but can't see a way around this.

I don't necessarily want to compete, and certainly wouldn't be chasing existing customers, in fact I'd love to act as a distributor for some of the equipment we manufacture (still making them money), but although I have my own ideas, it's in the same industry and I know they wouldn't want me to leave anyway.

I'm assuming, as I signed it, it's completely enforceable.

Can anyone see a way around/out of this?

Hoping someone can advise/help!

Dan.

Helvetica_Van_Buren

up4thecup wrote: »

Hi all,

I wonder if anyone could offer their advice/thoughts on an issue I have. I've been at a company for the last 10 years and worked my way up to a decent level. However, I'm very ambitious and have been exploring my options in terms of leaving and going it alone. I'd even started drafting a business plan, discussed it with friends and family, as well as friends who run their own business.

The plans were coming together nicely until I dug out my contract and confidentiality agreement which I signed way back in 07/08. I was shocked to see they had placed a 10-year restrictive covenant which looks like it's going to put a spanner in the works.

It states a period of 10 years from the termination of employment and covers trade secrets, operations, processes, plans, intentions, product info, know-how, market opportunities, prospects/leads, etc...

I've done some reading on this and companies that include these restrictions tend to put in 6 months or so, so 10 years seems a bit excessive, especially considering this is all I have done for pretty much all my adult life (now 32), to be honest I feel a little trapped. I worked for myself when younger, albeit a different industry and would love the challenge of doing it again, but can't see a way around this.

I don't necessarily want to compete, and certainly wouldn't be chasing existing customers, in fact I'd love to act as a distributor for some of the equipment we manufacture (still making them money), but although I have my own ideas, it's in the same industry and I know they wouldn't want me to leave anyway.

I'm assuming, as I signed it, it's completely enforceable.

Can anyone see a way around/out of this?

Hoping someone can advise/help!

Dan.

You needed to check it before you signed it.

It is enforceable.

Does it state the territories you are prohibited to operate in for the 10 years? If so, can you operate outside of those territories?

Can you come to an agreement with your employer and get some kind of agreement (in writing, obviously) to reduce the restrictions of the covenant?

You could just go ahead and do whatever you were going to do and either hope they don't find out or just accept you'll deal with the consequences if and when they do find out.

You don't have to write answers to these questions, they're just food for thought for you.

rhysadams

I have been told recently that the maximum they can do is 1 year, however if it goes to court and you can prove that this is your only skill and therefore, cannot make an income from elsewhere, it "may" go in your favour. Get advice from an HR expert, well worth the money. Or even speak to ACAS

peter3hg

It is extremely unlikely to be enforceable. Anything over 1 year is only reasonable in exceptional circumstances and I fail to see how a 10 year clause could ever be reasonable. I would suggest you can safely ignore this particular clause.

Link

up4thecup

Helvetica_Van_Buren wrote: »

You needed to check it before you signed it.

It is enforceable.

Does it state the territories you are prohibited to operate in for the 10 years? If so, can you operate outside of those territories?

Can you come to an agreement with your employer and get some kind of agreement (in writing, obviously) to reduce the restrictions of the covenant?

You could just go ahead and do whatever you were going to do and either hope they don't find out or just accept you'll deal with the consequences if and when they do find out.

You don't have to write answers to these questions, they're just food for thought for you.

Thank you all for speedy replies. Back then it was my first job other than bar work, etc and would never have thought back then about this type of thing.

There are no geographical limitations, we supply companies all over the world, and to all industries including food, healthcare, police, automotive, aerospace, etc!

I'd only be focusing on the food industry as that is where the most potential is, though may pick up the occasional sale in other markets as it would be similar product range.

At the moment it's not something I'd be comfortable discussing with them as still exploring and wouldn't want to put it in their mind if it wasn't to happen.

up4thecup

rhysadams wrote: »

I have been told recently that the maximum they can do is 1 year, however if it goes to court and you can prove that this is your only skill and therefore, cannot make an income from elsewhere, it "may" go in your favour. Get advice from an HR expert, well worth the money. Or even speak to ACAS

peter3hg wrote: »

It is extremely unlikely to be enforceable. Anything over 1 year is only reasonable in exceptional circumstances and I fail to see how a 10 year clause could ever be reasonable. I would suggest you can safely ignore this particular clause.

Link

Thank you both. I thought that too. I assumed it would be one year which would have been reasonable. I will take a look at this in more detail later. Appreciate the advice and info.

If anyone else has thoughts or comments I would still be interested to hear them.

Undervalued

rhysadams wrote: »

I have been told recently that the maximum they can do is 1 year, however if it goes to court and you can prove that this is your only skill and therefore, cannot make an income from elsewhere, it "may" go in your favour. Get advice from an HR expert, well worth the money. Or even speak to ACAS

That is a huge simplification of what can be a very complex area indeed.

The OP needs to get proper professional legal advice (which he certainly won't get from ACAS)! Even then it will only be an expert opinion of what they think a judge will decide.

On the face of it what the OP describes seems grossly excessive and there would need to be some fairly exceptional circumstances.

However, on a more practical level, the bigger danger is his old employers threatening to sue this new employer for enticing him to breach his contract. Whatever the rights and wrongs, if it ever came to court, that can often have the desired effect by making the new employer take the easy option of getting somebody else.

sangie595

Undervalued wrote: »

That is a huge simplification of what can be a very complex area indeed.

The OP needs to get proper professional legal advice (which he certainly won't get from ACAS)! Even then it will only be an expert opinion of what they think a judge will decide.

On the face of it what the OP describes seems grossly excessive and there would need to be some fairly exceptional circumstances.

However, on a more practical level, the bigger danger is his old employers threatening to sue this new employer for enticing him to breach his contract. Whatever the rights and wrongs, if it ever came to court, that can often have the desired effect by making the new employer take the easy option of getting somebody else.

This is the only advice on this thread that is correct. Absolutely nobody can tell you whether it is enforceable or not based on one out of context possible phrase in a contract. We don't know who you work for, what you do, and how critical it is. Do not opt for believing the advice you like best. Get proper advice. A huge company such as the one you describe sounds an unlikely candidate for dreaming up an unenforceable and silly time period. So I'd want to check why they think they can insist on it. Getting an explanation after they sure you may not be a good idea!

Alter_ego

Undervalued wrote: »

However, on a more practical level, the bigger danger is his old employers threatening to sue this new employer for enticing him to breach his contract. Whatever the rights and wrongs, if it ever came to court, that can often have the desired effect by making the new employer take the easy option of getting somebody else.

OP is talking of going it alone, no new employer involved.

sangie595

Alter_ego wrote: »

OP is talking of going it alone, no new employer involved.

True. But it isn't hard to sink someone's business if a big one decides to make a play for it. Companies like this have lawyers on tap who can ream off things that cost you money to deal with in a fraction of a minute. They can ruin you without any effort. And when they have done that, you still have to find a job with no reference. Even if this is unenforceable, you really don't want to get up the noses of your employer. Negotiation and getting their support, and perhaps compromise, may be required. It'll certainly have better results than skating on thin ice.

Humdinger1

Dan,

Admittedly several years ago but I had to look into this very issue. I do agree that it's worth getting expert advice now but back then, I was informed that this sort of clause amounted to restriction of trade and courts don't like that. They also frown on attempts to stop people earning a living. If such a draconian clause is in a contract, it's liable to be red-lined - ie struck out entirely, rather than modified, as it's so unreasonable. The absolute max that someone can be usually be stopped for is 2 years, and you'd have to be a a director for that to be enforceable as unless you were making a packet at the time and could save enough, what are you supposed to live on in the meantime? 10 years in all global markets is simply absurd.

The points that other posters have made about your efforts being quashed are fair - how likely are you to annoy your current company enough to make that happen? That's why people do sometimes try to set up support from key partners at an early stage though that can be problematic if you're still employed elsewhere. Depending on your co and its culture, they might even be one such supporter? Please come back with more details?

Humdinger