Restrictive covenants

in2deep_2 · 15 March 2018 at 9:53PM

I’ve been working for the same employer for 13 years now I don’t have a signed contract as I began work based on a formal letter of appointment.
The company is now switching to a Ltd company and new contracts are being drawn up with restrictive covenants,I’ve never seen one nor do I understand them.
We are a small company of less than 10 in a tiny town.
It states that if I leave I can’t work for anyone in competition or any company in a the same or similar role within 5miles. Is this normal.??

It also states that my role will have a 12weeks probationary period (really,after 13years??)
Does this mean I’ve lost any time served benefits from the last 13years as well.?

I know I’m going to have to sign it eventually but we are being given the chance to discuss concerns before we do.

steampowered · 15 March 2018 at 10:34PM

It is probably a generic contract for all employees, including new people hired in future.

I don't think you need to be worried about the probation clause as you have long passed that.

You should retain all time served benefits, as your continuity of employment is not affected by a new contract.

Restrictive covenants are common these days. A covenant saying you won't work for a competitor within 5 miles for a short period of time (e.g. 3 months) is probably common.

If the restrictive covenant stops you from working for any competitor it is worth querying though, unless your company does something very niche. The key question is would it stop you getting another job if you decided to leave in future.

Energize · 15 March 2018 at 10:56PM

Restrictive covenants are largely unenforceable, companies can't deny you the right to earn a living.

in2deep_2 · 15 March 2018 at 11:21PM

Thank you, the business is very niche although we trade world wide, there are probably no more than 5 companies in the uk interested in what we do. Think of it like this ,there are many garages out there fixing cars,some only fix Fords even less only fix one type of ford, by comparison we only fix one type make year and colour. (We don’t actually fix cars but you get the idea)

Our nearest direct competitor is about 90miles away so I’m hardly likely to go there.

BooJewels · 16 March 2018 at 12:14AM

My husband had a case many years ago where he changed jobs and his former employer started legal action against him, enforcing the covenants in his contract in respect of working for competition.

We went to see our solicitor and he read the contract and guffawed, saying that they were so restrictive as to be unenforceable (as Energize said earlier) - it would prevent him making a living in his chosen profession and he could only do so by moving house. So he wrote to them in response, effectively saying 'go away and stop being so silly' and that was the last we heard of it.

You can understand them putting in covenants about not taking client details with you when you leave or directly approaching them to poach the work, but they can't control who you work for.

agrinnall · 16 March 2018 at 10:09AM

in2deep wrote: »

Our nearest direct competitor is about 90miles away so I’m hardly likely to go there.

I don't see how the covenant can possibly affect you if there is no direct competitor within the 5 mile range anyway. The only issue would be if it prevented you setting up on your own to do the same job, does it?

Ja7188 · 17 March 2018 at 11:49AM

From the OP's description, I'd say that the covenant is too restrictive to be enforceable. I suspect it would be more likely to stand up if he/ she was only prevented from soliciting customers of the current employer - although as I understand it, even then it would be challenge to enforce.

If an individual moves jobs and break their covenants, I think (and I could be wrong) that if their previous employer wanted to try to enforce them, they would have to take action against the new employer as well as the individual themselves. If this is true, it would help explain why people so often seem to get warning letters and no attempt to take matters further...

anamenottaken · 17 March 2018 at 11:57AM

I would just suggest that when you look at that contract when you actually receive it you should ensure that it gives the date for the commencement of your continuous employment as the date 13 years ago. As long as it does that, your long-service benefits should continue. However, depending on what those benefits are, your employer may remove them in the future, just as they could over the past 13 years.

in2deep_2 · 17 April 2018 at 9:28PM

The amended contract now says
The company shall pay £100 to you as consideration for entering into the restrictive covenants
Is this a bribe.? Can I refuse it and then not adhere to it.?

Ja7188 · 18 April 2018 at 8:31PM

How long after your employment ends do they want to keep the restrictions running for? Unless it's a pretty short period, £100 doesn't sound like a good deal...

I don't think you're under any obligation to sign it, but your working life may become difficult if you're seen to be making a fuss.

ReadingTim · 19 April 2018 at 11:50AM

in2deep wrote: »

The amended contract now says
The company shall pay £100 to you as consideration for entering into the restrictive covenants
Is this a bribe.? Can I refuse it and then not adhere to it.?

No, it's a recognition that you are giving up some of your rights and providing a degree of compensation for that fact. Whether you feel £100 adequately covers it is up to you - you could negotiate for more, or state that you won't agree to the inclusion of that clause in the contract at all. They in turn can agree to a greater payment, the removal of the clause in question, or neither. You either try further negotiation or you reach a decision: accept what's on offer, or don't sign the contract, and essentially do yourself out of a job going forward.

What you cannot do is sign the contract then ignore the terms set out within it! With regard to overall enforceableness, a 5 mile range isn't exactly massive, so you might struggle with that, unless you were doing something so specific and geographically concentrated that it couldn't be done anywhere else....

Restrictive covenants

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