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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
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Experience:  Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
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I have a question about my UK employment contract

Customer Question

I have a question about my UK employment contract. I have the following two statements in my employment contract:-





Except with prior written consent of the Company, the Employee shall not during the Restricted Period, within the Restricted Area, be engaged or interested in or concerned in a technical, sales or managerial capacity (and whether on his/her own account or in conjunction with any other party) with any person, firm or company or any other business which supplies or provides (or intends to supply or provide) Relevant Products or Services in competition with the Company or any Relevant Group Company provided that this restriction does not apply to prevent the Employee from (i) undertaking duties or activities which are materially different from those undertaken by him/her in the course of his/her employment during the Relevant Period or (ii) holding shares or other securities in any company which is quoted, listed or otherwise dealt in on a recognised investment exchange or other securities market and which confer not more than 5% of the votes which could be cast at a general meeting of such company.

Except with the prior written consent of the Company, the Employee shall not, in competition with the Company or any Relevant Group Company, during the Restricted Period (in any capacity whatsoever and whether on his/her own account or in connection with any other party) canvass or solicit or accept orders or facilitate the canvassing or soliciting or acceptance of orders for the supply or provision of Relevant Products or Services from a Relevant Customer.

I also run a part-time/evening business for the past 8-9 years which buys goods from the company I now work for(I signed this contract in september 2014). The goods I buy from the company we resell to eBay/Amazon customers. Am I breaking the rules laid out in my employment contract by doing this?

thanks




Submitted: 1 year ago.
Category: Employment Law
Expert:  Ben Jones replied 1 year ago.
Ben Jones : Hello, my name is ***** ***** it is my pleasure to assist you with your question today. Do your activities actually mean you are working in competition with your employer?
JACUSTOMER-uu783tfe- :

I don't see it as competition as I buy their products, add some margin and sell to a different audience(i.e. ebay/amazon)

JACUSTOMER-uu783tfe- :

they sell through their own website

JACUSTOMER-uu783tfe- :

to add some more information. I don't receive any special pricing, I buy from their normal pricing structure, sometimes I get the speical offer deals but they are open to anyone to buy. I then sell these on eBay, the price maybe less than their standard retail price, but obviously not as low as there speical bulk buy pricing. hope this helps

Ben Jones :

Sorry my connection dropped earlier. Have you checked the definitions in the contract to see if you are likely to breach the restriction (like Restricted Area, Relevant Products or Services, etc)?

JACUSTOMER-uu783tfe- :

here's that portion of my contract

JACUSTOMER-uu783tfe- :




  1. the “Relevant Products or Services” shall mean products or services which are of the same kind as or of a materially similar kind to or competitive with any products or services sold or supplied or provided on a trial basis by the Company or Relevant Group Company with which the Employee has been actively concerned at any time during the Relevant Period;





JACUSTOMER-uu783tfe- :




  1. 1.11. the “Restricted Area” shall mean the territories in which the Company trades and in which the Employee worked or to which the Employee was assigned by the Company or Relevant Group Company at any time during the Relevant Period;





JACUSTOMER-uu783tfe- :



1.6.
such provision is applied) the commencement of any period of exclusion pursuant;






1.8.




the “Restricted Period” shall mean the period of the Employee’s employment under this Agreement and the period of 3 months from the termination of the Employee’s employment under this Agreement. The Restricted Period shall be reduced by one day for every day during which at the Company’s direction the Employee is placed on garden leave;






“Relevant Period” shall mean the period of 12 months immediately before the Termination Date or (where “Relevant Customer” means any person, firm, company or organisation who or which at any time during the






1.7.
Relevant Period is or was:







  1. negotiating with the Company or Relevant Group Company for the sale or supply of Relevant Products or Services; or




  2. a client or customer of, or in the habit of dealing with, the Company or Relevant Group Company for the sale or supply of Relevant Products or Services,




and in each case:




  1. with whom or which the Employee was directly concerned or connected during the Relevant Period in the course of his employment; and/or




  2. with whom any Company or Group Company employees reporting to the Employee were directly concerned or connected during the Relevant Period in the course of their employment; and/or




  3. about, or in respect of, whom the Employee has Confidential Information





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. So if your services significantly differ from those offered by the employer and you will not directly comet with them, you will have a reasonable case to try and argue that the restrictions are unreasonable and should not be enforceable.

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.

I hope this clarifies your position? If you could please quickly let me know that would be great, as it is important for us to keep track of customer satisfaction. Thank you

Ben Jones :

Hello, I see you have accessed and read my answer to your query. 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? I just need to know whether you need further help or if I can close the question? Thank you

JACUSTOMER-uu783tfe- :

hello Ben,

JACUSTOMER-uu783tfe- :

your response talks as if I am an ex-employee. I am still working for this company whilst also controlling my other business interests. From reading your comments above it sounds like I am ok to continue trading as long as I don't use my position at the company to gain better pricing or insider information(which I am not as my role is within a different department to the sales side of the business).

JACUSTOMER-uu783tfe- :

I just need to clarify where I stand on this, can they dismiss me if they find out about my outside business interests?

JACUSTOMER-uu783tfe- :

thanks for your assistance thus far

Ben Jones :

Hi, sorry for the confusion – because such clauses are mainly used after you leave your job I automatically assumed that mode when preparing my response but the same principles apply whether you are still employed by them or have left. The one main thing if you are still employed is that you do not act in a manner that would be considered a breach of trust and confidence so that you do not do anything that would mean you re affecting your employer’s business, like devoting time from you work with them to pursue your own interests, taking business or clients away or affecting their reputation.

As to dismissal, can you let me know how long you have worked there for please?

JACUSTOMER-uu783tfe- :

I have worked for them for 7 months now. I have had my outside business interest running since 2003

Ben Jones :

the issue here is that you are not protected against unfair dismissal as you do not have 2 years' service so legally they can dismiss you for more or less any reason, whether you have done something wrong or not, so there would be a risk

Ben Jones :

Does this clarify things for you?

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