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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
Satisfied Customers: 44874
Experience:  Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
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I am a self employed contractor working company and

Customer Question

Hi, I am a self employed contractor working for a company and have these clauses within my contract. How legally binding are they?
10. Non Solicitation
10.1 The Consultant undertakes that he shall not during this Agreement, nor during the period of 12 months following the termination of this Agreement, either, on his own account or in conjunction with or on behalf of any other person, firm or company, solicit or entice away from the Company any employee or consultant of the Company (including but not limited to any Back-to-Back Consultant) with whom he has worked in the course of providing the Services hereunder.
10.2 The Consultant undertakes that he shall not during this Agreement, nor during a period of 12 months following the termination of this Agreement, either, on his own account or in conjunction with or on behalf of any other person, firm or company, without the Company's prior knowledge and agreement, solicit or endeavour to solicit any business of the same nature as the Business from any person who at any time within the 2 years prior to date of termination of this Agreement has been a client of the Company and with whom he worked personally in the course of providing the Services hereunder.
11. Non Dealing
11.1 The Consultant undertakes that he shall not during this Agreement, nor during the period of 12 months following the termination of this Agreement (except with the prior written consent of the Company) either directly or indirectly, on his own account or in conjunction with or on behalf of any other person, firm or company, deal with, be engaged by, concerned or interested in, or give advice to any other person acting on behalf of, active clients of the Company.
11.2 The provisions of Sub-clause 11.1 are considered by the parties to be reasonable and necessary for the protection of the goodwill and Confidential Information of the Company.
Kind regards, Sean.
Submitted: 1 year ago.
Category: Employment Law
Expert:  Ben Jones replied 1 year ago.
Hello, my name is ***** ***** it is my pleasure to assist you with your question today. 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
• 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: replied 1 year ago.

Hi Ben,

Thank you for your detailed response. I guess I asked you a very generic question as to which there would be quite a generic answer. To be more specific - I am a self employed contractor who works for a UK company, they subcontract me to a US communication company (the customer/client). The UK company are predominantly a security company and the communication part pretty much fell on their lap. The customer is becoming greatly disgruntled with the service this UK company is providing and the personnel they're providing them with. To this end, the UK company are now asking me to provide Subject Matter Experts (SME's) that I know so that they can employ them and pass them onto the customer - at an obvious mark up rate. I have done this numerous of times over the years.

The US company (customer) is now expanding their operations and asking the UK company to provide more SME's in turn the UK company are asking me to provide these personnel. There is no incentive and has not been for me to provide them with these SME's - what is stopping me from setting up my own company and providing these personnel direct to the customer - to which the US company have been saying I should do!

I am a New Zealand resident and the company would be a NZ registered company - not sure if this would make a difference if they came after me.

My other concern would be the number of people I've currently provided them are very disgruntled with the UK company and if i set up on my own I know they would jump ship in a heart beat.

Any advice or help with this dilemma would be gratefully appreciated. I also appreciate that you're not going to say - yeah, go for it - everything is going to be fine.

Kind regards,

Sean.

Expert:  Ben Jones replied 1 year ago.
Thank you for your response, which I will now review. I will get back to you as soon as possible. Please do not respond to this message as it will just push your question to the back of the queue and you may experience unnecessary delays. Thank you
Expert:  Ben Jones replied 1 year ago.
Hello again, your residence status and the registration of the company would not make any difference here. So I see you want to set up on your own and provide the SMEs directly to the company. There is indeed a potential that the company could stop that if they can show that you had a direct influence over the clients in question and that you are going to be using such influence to take business away from the company. It really depends on how close you were to the clients in question, whether you had a direct influence over their business and that you were the key professional who they would deal with and would follow wherever you go. This is what the courts would look at – I am sorry I cannot be more precise as there are far too many factors that would be looked at but I have tried to cover the main ones. Hope this helps a bit more.
Expert:  Ben Jones replied 1 year ago.
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
Expert:  Ben Jones replied 1 year ago.
Hello, do you need any further assistance with your situation or has your query been answered? Thanks

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