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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
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Hello. Can you please let me know about my legal position

Resolved Question:

Hello.

Can you please let me know about my legal position if I wanted to move to another company who work in the same end customer as my current employer (Restricted customer)?
Could i move directly? Could that cause them to really want to come after me? What could that mean?
If I went contracting or something else, how long would I have to go realistically?

At the moment I believe I am limited in options.

Here is the contract.

Post Termination Restrictions

9.1 The definitions in this clause apply in this Agreement:

Employment - The employment of the Employee by Employer on the terms of this Agreement.
Capacity - As agent, consultant, director, employee, owner, partner, shareholder or in any other capacity.
Confidential Information - See clause 8 above.
Group Company - Employer and any subsidiaries of Employer.
Product or Services - Data, consulting services, software, hardware, IT services or other products or services that are the same as or substantially similar to those that Company sells or supplies.
Restricted Business - Those parts of the business of Employer with which the Employee was involved to a reasonable extent in the six months prior to Termination.
Restricted Customer - Any firm, company or person who was a customer, prospective customer, supplier or prospective supplier of Employer with which the Employee was involved to a reasonable extent in the twelve months prior to Termination.
Restricted Person - Anyone employed or engaged by Employer and with whom the Employee had contact with in the six months period prior to Termination in the course of his/her employment
Subsidiary - In relation to a company (a holding company) means a subsidiary as defined in section 1159 of the Companies Act 2006 and any other company which is a subsidiary (as so defined) of a company which is itself a subsidiary of such holding company.
Termination - The termination of the Employee’s employment with Employer howsoever caused (including, without limitation, termination by Employer in repudiatorty breach of contract).

9.2 In order to protect the Confidential Information to which the Employee has access as a result of the Employment, the Employee covenants with Employer (for itself and as trustee and agent for each Group Company) to not:
(a) For twelve months after Termination, solicit or endeavour to entice away from Employer or any Group Company the business or custom of a Restricted Customer with a view to providing Products or Services to that Restricted Customer.
(b) For twelve months after Termination, offer to employ or engage or otherwise endeavour to entice away from Employer or any Group Company any Restricted Person.

(c) For twelve months after Termination, directly or indirectly assist a third party from approaching, soliciting or offering employment to any Restricted Person.

(d) For six months after Termination, be involved in any Capacity with any Restricted Customer.
(e) For twelve months after Termination, be involved with providing Products or Services to or otherwise have any business dealings with any Restricted Customer.
(f) For six months prior to Termination not to take preparatory steps to set-up business or assist a business concern which is intended to be, wholly or partially, in competition with the Restricted Business.

(g) Use in connection with any business any name which includes the name of Employer or any similar name.
(h) At any time after Termination, represent him/herself as connected with Employer or any Group Company in any Capacity.
9.3 None of the restrictions in clause 9.2 shall prevent the Employee from holding an investment by way of shares or other securities of not more than 5% of the total issued share capital of any Company, whether or not it is listed or dealt in on a recognized stock exchange.

9.4 The restrictions imposed on the Employee by this clause 9 apply to him/her acting:
(a) Directly or indirectly; and
(b) On his/her own behalf or on behalf of, or in conjunction with, any firm,
company or person.
9.5 The periods for which the restrictions in clause 9.2 apply shall be reduced by any period that the Employee spends on garden leave immediately prior to Termination.
9.6 If the Employee receives an offer for alternative employment or the provision of consulting services in any Capacity during the Employment, or prior to the expiry of the last surviving covenant in this clause 9, the Employee shall give the person or company making the offer a copy of this clause 9 and shall tell Employer the identity of the person or company making that offer promptly after accepting the offer.
9.7 Each of the restrictions in this clause 9 is intended to be separate and severable. If any of the restrictions shall be held to be void but would be valid if part of their wording were deleted, such restriction shall apply with such deletion as may be necessary to make it valid or effective.
Submitted: 3 years ago.
Category: Employment Law
Expert:  Ben Jones replied 3 years ago.

Ben Jones :

Hello, my name is ***** ***** it is my pleasure to assist you with your question today. How would your current employer be affected if you moved to a competitor? Would you use any confidential information from them, poach clients or staff, etc?

Customer:

In theory my current position would be available for them to fill with another person (time to fill of course).
At the moment i am the only person trained in this role.

Customer:

The company who has asked me to move over has an alternative position so i would not be trying to take the role also

Customer:

No information i believe at this stage.

Customer:

all data is owned by the 'restricted' customer and work on for them

Ben Jones :

But by moving you would not be directly taking data or similar information - it would already either be held by the customer or be available in the public domain?

Customer:

I would be taking my knowledge. My role is directly into the customer working within their team . My employer is in effect contracting me into the customer.

Customer:

I am in Network Eingineering / design.

Customer:

I work on projects that need connectivity

Customer:

Information would be about the network setup and how to route information.

Customer:

There is no application software that i work on that i could take the competition.

Customer:

The other company is simular, placing people into the customer but they are working on other areas and more concultancy also rather than pure engineering

Ben Jones :

SO I presume if you move to work directly with the customer the current employer will also lose out on revenue from hiring out your services?

Customer:

Its not to the customer but to another company that provides into the customer.
But potentially yes. If they cannot fill the role or the customer says that they dont want someone else from my company the revenue could be lost but that could be the same if i left fully to work else where anyway.

The company that is asking me about moving also has people in the team i an currently in

Customer:

doing a similar work.

Customer:

its a little complicated the structure but in effect they are doing the same work

Ben Jones :

ok thanks, ***** ***** get my response ready please

Customer:

OK thank you.
I guess your advice and what the possible consequences would be in theory.

Customer:

Sorry I also removed my company name in the contract item for the 'employer'.

Ben Jones :

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.


 


Legitimate business interests (LBIs) are commonly accepted to include:



  • Goodwill (including supplier and customer connections)

  • Trade secrets and confidential information

  • Stability of the workforce


 


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.


 


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:



  • Obtain an interim injunction preventing the employee from doing certain things that would make them in breach of the restrictive covenant

  • Seek compensation for damages that have directly resulted from the breach of the covenants


 


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.

Customer:

Thank you for the feed back.
I have heard from none legal people before and information checks that its very subjective.

Customer:

With regards ***** ***** legal fall out, i guess for me the costs could be legal council and also if compensation is requested the value that this could be which of course is unknown.

Ben Jones :

The key is that they cannot just penalise you for any breach - any compensation has to reflect actual losses suffered

Customer:

Based on your view, how well if this drafted?
Well or loose based on the belief that this is a standard contact across all of the companies activities.

Ben Jones :

Difficult to say how well or badly it is drafted because it would depend on many more specifics which are detailed and unknown to me. It does depend on what exactly they are trying to protect with it and to be honest unless it can be show you had a strong influence on the work or that by you going there will be a serious effect on their business, it could be difficult to apply such restrictions

Customer:

Thank you. I guess it could be argued that if i am the only person that they have doing a role it is in fact their poor management and planning to have support in place in case someone does leave.

Ben Jones :

to an extent yes, but it is not a foolproof defence....then again as mentioned it all depends on the employer actually pursuing this formally, often the costs of doping so compared with what they can achieve in return are disproportionate

Customer:

If i was to be conservative in my approach to the current contract, which of the time limits would i need to adhere to to ensure that I am not breaking the working with a customer.
The 6 months direct customer or the 12 months providing services (if that covers in directly through another company)?

Ben Jones :

Well the 12 months, if you wanted to act on the cautious side

Customer:

Yes sometimes it could just be a formality they want.

Customer:

I am aware that a collegue moved directly to the customer and they were not happy there but I think that situation was different as they 'agreed' a solution between in effect the supplier and customer to avoid issues.

Customer:

I also have heard that for a contractor they sent a 'warning' email about legal restrictions when they let someone go. Nothing happened within and they went elsewhere but they could just be flexing their options. Whether anything would come of it only they would know.

Customer:

Would you say at the moment, the final view would be that there is potential in what they could try but the onus could be on them to prove 'hard ship' and fundamental loss in effect.
As you say, the contracts cannot be used to stop people unnecessary moving/having a trade and should have cause and effect to be enforceable.

Ben Jones :

A warning means nothing, unless they actually sue you and win there is little they can do apart from threaten you

Customer:

Thank you for your time and assistance. Ultimately it is still an unknown quantity (on all counts) and I would need to decide what to do. Weigh up the pros and cons.

Ben Jones :

you are welcome, all the best

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