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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
Satisfied Customers: 49801
Experience:  Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
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Hello, I have a question regarding an employment service

Customer Question


I have a question regarding an employment service agreement that my company submitted me (this is an investment company dedicated to investing in hotels in Western Europe). I have been working at the company for a year and half, first as an intern for 9 months, then as a financial analyst for 9 months, though I havent signed any employment contract yet for this financial analyst position as the first service agreement proposal I received 9 months ago had restrictive covenants which were unaccurate and not satisfactory to me. My company went to a lawyer to have a new template of service agreement drafted (which would be used for all of the company employees going forward), and now the two restrictive covenants (non-compete and non-solicit) are much clearer. Please find below the whole section about the "Restrictive Covenants" plus some useful definitions. I'm fine with the non-solicit covenant (point 15.2), my question to you is about point 15.1 (non-compete). I understand that a non-compete covenant can be required for a job which is industry specific. Though, in my case and given my very junior position (I'm only a first year analyst, earning £36k a year), I feel that the 6-months non-compete is a bit harsh, at least financially speaking for me. It is true that I gather much knowledge about the industry through this job and that the definition of "Competing Business" for which the covenant would apply is quite/very restrictive (see below) but still, I would like to have your view about this 6-month non-compete period (vs 3 example) given my current position. Thank you in advance, Hadrien Monville

15.1 The Executive agrees with the Company that he will not, directly or indirectly, for a period of [six] months immediately following the Termination Date:
(a) carry on or be interested in a Competing Business, save that he may be interested in shares or securities in a company conferring not more than 3% of the votes that could be cast at a general meeting of that body corporate;
(b) act as a consultant, employee or officer or any other capacity in a Competing Business;
(c) either on his own account or on behalf of any Competing Business deal with a Co-Investor;
(d) either on his own account or for any person, firm or company or other undertaking employ or otherwise engage or facilitate the employment or engagement of the services of any Key Employee whether or not any such Key Employee would in entering into the employment or engagement commit a breach of contract.

"Competing Business" : means any business in (i) Belgium, England, France, Northern Ireland, Scotland, Spain or Wales or (ii) any other country in which an Investee Company is based, which competes or is preparing to compete with any business carried on by the Company or any Associated Company in which the Executive has been actively engaged or involved at any time during the Relevant Period;
Submitted: 4 years ago.
Category: Employment Law
Expert:  Ben Jones replied 4 years ago.

Ben Jones : Hello, my name is Ben and it is my pleasure to assist you with your question today. What are your plans for working with a competing business after termination?
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I have no plan to change job on the short term. If I change job at some point, I don't know if I'll stick to a "competing business" (as defined in the service agreement, i.e. another hotel investment company in Western Europe competing with my company), but the longest I work in my current job the highest the probably gets that I would switch for a "competing businiess" (employability/skills issue). Also, in your opinion, if a new employer wants me, would he be able to compensate my current employer for employing me before the end of this 6-month period?

Expert:  Ben Jones replied 4 years ago.
Thanks for getting back to me. 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 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

It may indeed be possible for the new employer to ‘buy you out’ of these covenants but that will only really happen with the consent of the employer that imposed 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 and feel free to bookmark my profile for future help:
Customer: replied 4 years ago.

Thank you very much. Two ancillary questions:

- There is nothing in the English law saying that a non-compete covenant should be compensated financially (cash) by the current employer? Such rule exists in French employment law for instance.

- In the covenant section, there is a paragraph saying:"15.4 The Executive agrees that each of the restrictions set out in Clauses 15.1 (NB: non compete) and 15.2 (NB: non-solicit) constitute entirely separate, severable and independent restrictions on him. The Executive acknowledges that he had the opportunity to receive independent legal advice on the terms and effect of the provisions of this Agreement, including the restrictions above". Does this mean the company should finance/refund the cost of this legal advice? I dont see why I should incur any legal expense as a future employee...



Expert:  Ben Jones replied 4 years ago.
Hello, no there is no law that says an employer can 'buy you out' - any offers can be considered but if the original employer refuses the offer and has a legitimate reason to enforce the restrictions they can remain in place.

Unfortunately the company has no obligation to compensate you for any legal advice you have received in relation to this, either during your employment or afterwards. The only time your legal costs may be covered is if they sue you and lose and the court may then order them to cover some or all of your legal costs incurred in defending their claim.

If your original question has been answered I would be grateful if you could please quickly rate my answer - it only takes a second to do and is an important part of our process. I can still answer follow up questions afterwards if needed. Thank you