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Ben Jones
Ben Jones, UK Lawyer
Category: Law
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Im wanting to set up a company selling a ventilation

Resolved Question:

Hi
Im wanting to set up a company selling a ventilation system that cures condensation.
Im already working for a company selling a damp control system on a self employed basis.
However i have just found out I signed an confidentiality contract and anti competition agreement, which has the following paragraph.
"The undersigned will not get into competition neither with abc system nor another company belonging to the abc group of companies including companies, which have a license of one of the companies belonging to the abc group of companies (hereinafter referred to as abc) be setting up, working for, promoting or installing a damp proofing company or get into competition by any other means for a period of 2 years."
Based on the information above, would I be able to set up along side my existing job with them. the date of the contract was 2/9/2013
a further paragraph states "this contract starts with the day of employment with abc and terminates after five (5) years after leaving abc as an employee"
Submitted: 2 years ago.
Category: Law
Expert:  Ben Jones replied 2 years ago.
Ben Jones : Hello, my name is ***** ***** it is my pleasure to assist you with your question today. Will you be working in direct competition with them?
Customer:

The current system i sell for them is to control rising, penetrating damp and condensation. The other system is to eliminate condensation. So I guess its yes to your question, although if i thought the other companys product was a better solution, i would offer that instead.

Ben Jones :

Apologies for not getting back to you sooner, I experienced some temporary connection issues and could not get back on the site until now. All appears to be resolved now so I can continue dealing with your query.

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, such as the one you are subject to, 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. A general restriction completely preventing you from working in competition will be seen as too wide to enforce so could be unenforceable. However, a more specific one, such as restrictions on a specific region or to specific customer base could be reasonable.

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

Customer:

The one thing from the contract which you didn't mention is the two years. It didn't state in the contract whether it was 2 years from termination or 2 years from the start date. I presume as it didn't state and the contract was dated from the 3rd of september 2013. Then from 3rd September 2015 i would be ok to start the business anyway. As the contract would have to state 2 years from termination.

Customer:

Im i correct to assume this!

Ben Jones :

It is highly unlikely that the period would commence fro the start of your employment - these clauses are post-termination restrictions, they apply after your employment ends. Even though it may not have been specifically stated that it applies from termination it would be implied that it does as that is the standard practice in these circumstances. Sometimes clauses may not be as specific as one may expect them to but it does not mean that they will be void as a result

Ben Jones :

Does this clarify your position?

Customer:

Yes thanks

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