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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 46170
Experience:  Qualified Solicitor - Please start your question with 'For Ben Jones'
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I have worked for my company as a manager (mid level) for 2

Resolved Question:

I have worked for my company as a manager (mid level) for 2 years in the UK, the company (a multinational) is now getting brought out by another multinational. I don't want to hang around for long following the integration, I don't like the new company or its ethos and want out. I have been offered a job by a competitor to the company (old or new, they're a competitor to both) but i currently have a restrictive covenant in my contract. The covenant is 12m and I have 3m notice period.

I am wondering: Is this covenant enforcable under UK law? 1) it seems excessive since it's so long for someone at a middle manager level, 2) does the buyout actually render my covenant out of date anyway as it's a material change to my contract?

Thank you for any help!
Submitted: 3 years ago.
Category: Law
Expert:  Ben Jones replied 3 years ago.

Ben Jones :

Hello, my name is XXXXX XXXXX it is my pleasure to assist you with your question today.

Ben Jones :

What is the covenant for exactly?

Ben Jones :

PS: Just going in a meeting but will respond shortly, thanks

Customer:

Hey, thanks, XXXXX XXXXX standard restrictive covenant

Customer:

it says something to the effect of "the employee shall not work for or solicit business from competitors to XXX for the period of 1 year

Ben Jones :

Hi, thanks for your patience. Just getting my response ready for you now

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. 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-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.


 


As to the buyout being a material change to your terms, this will be covered by TUPE legislation where your employment and your current terms automatically transfer to the new employer so they should not make any changes to your contract. If you simply do not like the company as a whole or their ethos then that is not a change to your contract and you cannot argue it that way. But if they have actually changed terms of your contract and they are serious enough it could amount to a breach of contract on their part and you could argue the whole contract is void, including the restrictions.

Customer:

Thank you

Customer:

what would be deemed serious enough changes to contract, do you have some examples?

Ben Jones :

There is no list but it could include changes to pay, duties, place of work, status, etc

Customer:

thanks!

Ben Jones :

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?

Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 46170
Experience: Qualified Solicitor - Please start your question with 'For Ben Jones'
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