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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 47858
Experience:  Qualified Solicitor - Please start your question with 'For Ben Jones'
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Hi , I am currently considering leaving my present job with

Resolved Question:

Hi ,

I am currently considering leaving my present job with the view to setting up my own business approximately 15 miles away from my current place of work. The new business address would be in Lincolnshire. Please see extract below from my current contract, can my employer legally prevent me following my current course of action ?

Non-Competition:

INSTALLATION ENGINEERS – AUGUST 2010

You will not for a period of six months after the termination of your employment either personally or by an agent, whether on your own account or for or in association with any other person, firm, company or organisation, engage in business with or be in any way interested in any firm, company or organisation within the Lincolnshire area of Freewatt Ltd which engages in or carries on the business of renewable energy company that installs solar panels and the design and installation of photovoltaic.
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. How will your new business impact the employer's - will you be taking their clients, etc?

Customer:

No,

Customer:

I do not intend taking their clients

Customer:

The nature of work is largely solar pv and 95% of clients tend to be one off contracts

Customer:

I also have the following clauses

Customer:

Non-solicitation:


 


You will not for a period of six months after the termination of your employment either personally or by an agent, whether on your own account or for or in association with any other person, firm, company or organisation, canvass, solicit or endeavour to take away from the Company the business or custom of any customer or client of the Company with whom you personally dealt during the six months immediately preceding the termination of your employment.


 


Non-Dealing:


 


You will not for a period of six months after the termination of your employment either personally or by an agent, whether on your own account or for or in association with any other person, firm, company or organisation, for or in relation to any business or activity which is in competition with the Company deal, negotiate or contract with any client or prospective client with whom you personally dealt during the six months immediately preceding the termination of your employment.

Ben Jones :

ok let me get my response ready please

Customer:

Hi ben,

Customer:

I guess I may go into competition with them with regards XXXXX XXXXX clients

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-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:

I am the technical director at my current company. Will director status make any difference?

Ben Jones :

it could do in terms of the influence you may have but of course that depends on an individual basis

Customer:

The primary reason for leaving is the recent introduction of a new MD (chartered accountant) who has effectively taken complete control of the business including the technical aspects to a point that I have very little influence any longer which is one of my many gripes. i suppose that may help the situation.

Customer:

Moral is very low and i know at least 40% of staff are unhappy and intend leaving and are in process of looking for a job, this obviously fits into my plans to make a go of it on my own as I have several very talented staff at my disposal

Customer:

Could that be an issue - effectively teasing staff away?

Ben Jones :

the main issue is whether you try and poach them but I could not see a non-poaching restriction for staff, only customers

Customer:

We are all so fed up with the new regime and the working environment we are all probably going to leave together.

Customer:

geographically we will be at least 15 miles away, could be as much as 30 miles as we have the opportunity of a business premises at this distance - could that sort of distance benefit us ?

Ben Jones :

it could but there is certainly no defined distance after which you are 'safe' - it always depends on the business, your influence, the customer base, etc - it is definitely an area of law that varies from one case to the next

Customer:

I guess even at that distance we would be "batting on the sane wicket" so would be in direct competition.

Ben Jones :

yes but remember that competition itself is not illegal, it is how you go about it that matters

Customer:

One last point, and thank you in advance for your time, solar pv and renewables is a fairly new business and consequently a fairly small field to work in. during my role i have had a lot of contact with suppliers, built up good working relationships and would inten to carry on doing so. I have already spoken to some them and explained my intentions, I have naturally inquired about setting up a new account them and they have confirmed that it will not be a problem. Can you see if there would be any issues in carrying on with these contacts under my new business developments ?

Ben Jones :

potential problems may exist in the circumstances due to the restrictions but again it would depend on the level of contact you had with them, how important they are to the business, what influence you have over the business clients in general and so on. There is a whole range of factors a court would look at to determine if a restriction is enforceable, but also remember this depends on whether the employer actually takes this to court or blows a lot of hot ir just to try and scare you off

Customer:

agreed it would be a risk and a lot of hassle to take this through the courts, with regard to the supplier chain my present company would still receive the same support they always had whether I am there or not (unless of course she burns those bridges down too !)

Ben Jones :

the less they are affect by your acitons the more toothless the restriction would be

Customer:

Unfortunately the people who will leave with me will definitely have an impact on their business continuity, what busines can take a hit of 40% of its workforce leaving in one go?

Ben Jones :

true, but again the main issue here is with the clients rather than the staff

Customer:

good point, and as I said before the likelihood of us taking any clients away is very low

Customer:

Ben,

Customer:

its been a pleasure and thank you again for your advice,

Ben Jones :

You are most welcome. Please take a second to leave a positive rating for the advice I have provided as that is an important part of our process. Thank you and feel free to bookmark my profile for future help:



www.justanswer.com/law/expert-ben-jones/

Customer:

will do

Customer:

regards gary

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