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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
Satisfied Customers: 46784
Experience:  Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
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I wonder if you could advise me on the following, I

Resolved Question:

Hello, I wonder if you could advise me on the following,
I would like to know the worst case scenario if I was to breach the terms of my employment contract in terms of the covenant restrictions.
It states:
"The Employee confirms that, neither during his employment nor during the restricted period, without the prior written consent of the company (such consent not to be unreasonably withheld), whether by himself, through his employees or agents or otherwise and whether on his own behalf or on behalf of any person directly or indirectly, he will not:
1) So as to compete with the company either directly, or indirectly, solicit business from or canvas any customer in respect of respect of restricted goods;
2) So as to compete with the company accept orders from, secure contracts with act for or have any business dealings with, any customer in respect of restricted goods;
3) So as to compete with the company within the restricted area, be employed or engaged or at all interested in (except as a minority holder) a business or person which is involved in the distributing, selling, supplying or otherwise dealing with restricted goods, if the business is or seeks to be in competition with the company;
4) solicit or induce or endeavour to solicit or induce any supplier to cease to deal with the company and shall not interfere in any way with the relationship between the supplier and the company;
The employee hereby undertakes to the company that he will not at any time:
1) During his employment or after its termination engage in any trade or business or be associated with any person engaged in any trade or business using any trading names used by the company.
2) After termination represent or otherwise indicate any association or connection with the company or any group company or for the purpose of carrying on or retaining any business represent or otherwise indicate any past association with the company.
The restrictions in this clause (on which the employee has had the opportunity to take independent legal advice, as the employee hereby acknowledges) are separate and severable restrictions and are considered by the parties to be reasonable in all the circumstances. It is agreed that if any such restrictions, by themselves, or taken together, shall be adjudged to go beyond what is reasonable in all the circumstances for the protection of the legitimate interests of the company but would be adjudged reasonable if some part of it were deleted or the length of time or the geographical coverage of the restrictions reduced, the relevant restriction or restrictions shall apply with such deletion(s) or reduction(s) as may be necessary to make it or them valid and enforceable."
I am proposing to start up a business outside the geographical area, (in excess of 15 miles) in the same business, a new customer base will be used, the company owns 6 branches of which 5 are 225 miles away. ie: there is only one branch in my locality.
How I understand, the only issue the company could raise with me would be the restriction on time, ie starting up within 9 months.
My only concern to put it bluntly if this was taken to court would I be face a large fine?
Thank You In Advance
Mr P.Deeley
Submitted: 2 years ago.
Category: Employment Law
Expert:  Ben Jones replied 2 years ago.
Hello, my name is ***** ***** it is my pleasure to assist you with your question today. How would the company's business be affected by you starting up your business?
Customer: replied 2 years ago.

Hi Ben,

6 branches exist, 5 are at least 225 miles away, therefore would not be affected whatsoever, the branch that I currently manage would be 20 miles away from the proposed branch that I may start up, therefore the only way that it would affect the company's business is if a customer inside the 15 mile radius would chose to go to the new branch which could be nearer for them. (if that makes sense)

Regards

Phil

Expert:  Ben Jones replied 2 years ago.
Hello Phil, 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. 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:· Obtain an interim injunction preventing the employee from doing certain things that would make them in breach of the restrictive covenant{C}· 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 has answered your query. Please take a second to leave a positive rating, or if you need me to clarify anything before you go - please get back to me and I will assist further as best as I can. Thank you
Ben Jones, UK Lawyer
Category: Employment Law
Satisfied Customers: 46784
Experience: Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
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