Hello, my name is XXXXX XXXXX it is my pleasure to assist you with your question today. What would you like to achieve here please?
Hi Ben. I emailed some questions regarding restrictive covenants in my contract and the effect they have on me as I am being made redundant. Did you receive those already or should I copy and paste?
OK, thank you, XXXXX XXXXX this with me - I will look into this for you, get my response ready and get back to you on here. No need to wait around and you will get an email when I have responded, thank you
Brilliant. Thank you.
Thanks for your patience. So to answer your queries:
Firstly, is there anything that make them void if I am made redundant, rather than if I just got a different job?
The restrictive covenants will continue whether you are made redundant or leave voluntarily to find another job. The only time they would be made void is if the whole contract is void, such as through the employer’s serious breach of contract.
Secondly, the first covenent would obviously make it very hard for me as it covers pretty much everything I am qualified and experienced in. Unless I had a complete career change, or moved further away, it would effectively make me unemployable. I'm just wondering whether this covenent can be enforced?
Post-termination restrictive covenants are a rather common occurrence in employment relationships. An employer would want to protect their business from a departing employee's knowledge, business connections, influence over remaining staff, etc. However, a covenant that restricts an employee's post-termination activities will be automatically unenforceable for being in restraint of trade, unless the employer can show that it was there to protect a legitimate business interest and did so in a reasonable way.
An employer cannot apply a restrictive covenant just to stop someone competing with their business, but it can seek to stop that person using or damaging their LBIs by using a reasonably drafted covenant. There are a few different types of restrictive covenants that can be applied, these being:
1. Non-solicitation covenants are there to prevent an employee from enticing away the customers of their ex-employer and as long as they are reasonable are the most commonly enforced type of restriction. Solicitation generally means “directly or indirectly requesting, persuading or encouraging clients of the former employer to transfer their business to their new employer". To be valid, the covenant should be restricted to customers with whom the employee had contact during a specified period before leaving. Other relevant factors may include the employee's level of seniority in the business, the extent of their role in securing new business and the length of similar restrictions in the employment contracts of competitors.
2. Non-dealing covenants are a wider restriction and not only restrict solicitation but any other general contact with clients. The enforceability of a non-dealing covenant will depend on the interest being protected and can be influenced by a substantial personal connection the employee enjoys with a specific client. However, such a covenant will not be enforceable if it prevents any sort of contact with the client. The restriction must be focused on the specific type of contact that would directly affect the employer's business.
3. Non-competition covenants prevent an employee from working with a competing business or setting up to work in competition with their ex-employer. Such general restrictions are seen as a restraint of trade and will be difficult to enforce. They will only be seen as reasonable if in the process of working in competition, the employee uses trade secrets or sensitive confidential information belonging to their ex-employer, or their influence over clients is so great that such a restriction is necessary. The length of the restriction and its geographical coverage will also be relevant.
Whilst restrictive covenants are mainly used as a scare tactic by employers, if an employee has acted in breach of a covenant and the employer is intent on pursuing the matter further they can do so. The following are potential outcomes if the employer takes legal action:
As you can see there are no hard and fast rules on restrictive covenants. Whether a specific restriction is enforceable will always depend on the individual circumstances, the interest being protected and whether it has been reasonably drafted. The above principles are what the courts will consider when deciding whether a restriction is going to be legally enforceable. It should give you a good idea of what to look for in your situation and decide what the chances of this being pursued further are.
Would this covenent mean that if one of these graphic designers had a client ask them for a copywriter, that they couldn't then refer them to me?
Not necessarily, the less the employer’s business is affected by your actions on leaving the more chance you have of claiming these are reasonable and should be allowed.
Finally? Can I actually tell people I was made redundant?
As long as this is what actually happened, i.e. you volunteered yourself for redundancy and the employer still made you redundant, paid you redundancy and so on. This is not the same if you had actually resigned and not received redundancy pay. So as long as you were actually made redundant, you can say so.
Thank you. That's all very helpful. Please could I have a little bit more information on what the following means?
Well, these are examples of Legitimate Business Interests, which is what the employer must try to protect to claim that the restrictions are enforceable. So as mentioned it includes goodwill (such as clients or supplier connections and details), any trade secrets the employer has or their confidential business information and also the stability of the workforce, meaning its employees so they can try and prevent you from poaching their employees
Thank you. I understand that better now. Are those the only legitimate business interests they can claim? Or are there others? What I am understanding, is that essentially, I will be OK to freelance as a copywriter so long as I don't poach and clients, suppliers or staff or divulge any information that is specific to my current employer. The fact that I might be seen as competition (despite a different price point and marketing strategy) is irrelevant?
No, these are the most common examples, there is no actual list of LBIs. You are correct about the other assumptions - simply acting in competition is not enough to stop you, and you must be impinging on their LBIs to be stopped
Please let me know if this has answered your original question or if you need me to clarify anything else for you in relation to this? Thanks
Thank you. This has all been a great help. Just one more question and then I'll leave you alone! What if I don't go after a client, but they came to me and wanted to work with me? It hasn't happened but I can see that it might.
This would usually be covered by a non-dealing restriction, but I do not see you having one, so if you have not approached them first then it should be ok
Fabulous. Thank you. I'll fill in the rating below thing now. Thank you for all your help.