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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
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I was formally employed by an accountancy firm as an assistant

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I was formally employed by an accountancy firm as an assistant manager and signed a contract as such in 2007. The original contract had restrictive covenants with regards ***** ***** existing clients for 12 months if I was to leave. During my time with the employer, i was promoted and moved departments and never received a new contract or anything to agree variation in contract. My question therefore is, was the original contract still valid given the change in position and status?
I have since left and run my own practice. I have been approached by and old customer - not me approaching them, and my Old employer has said that this would be in breach of contract. Where do I stand, I have made no contact with the old contact and they contacted me completely independently as they were looking to leave their practice anyway.
Hello, my name is ***** ***** it is my pleasure to assist you with your question today. Does the restriction only prevent you from approaching these clients, rather than generally dealing with them?
Customer: replied 2 years ago.

On review it looks to be both, wording pasted below - company name replaced with 'company'.

  • solicit or entice away from Company or have any business dealings with any person, firm or company, who in the period of twelve months prior to the date of the termination of your employment was a client of Company and with whom you had dealings in the course of your employment during the twelve months immediately prior to the termination of your employment, where the purpose of the solicitation, enticement or dealings is to procure or undertake the business of the client in respect of services which are similar to or which compete with the services provided by Company at the time your employment with Company terminated. For the purpose of this, a "client" is any person, firm, company or organisation who is in the habit of dealing with or who has transacted business with Company (or its or their predecessor) at any time within the three years prior to the date of the termination of your employment or who in the twelve month period prior to and including the date of termination was in the process of negotiating with Company for the purpose of obtaining services from the Company.

The fact that you changed jobs but no new contract was issued does not necessarily mean that the original restrictions would no longer apply. There is an argument that the original contract still applies just with the relevant changes that have been implemented replacing the parts that no longer apply. On the other hand if your job has changed considerably so that the restrictions you initially had are no longer considered relevant to the last job you held, you also have an argument that they should no longer apply. The issue is that only a court can decide whether that is the case or not.
As far as the general law on restrictive covenants, such clauses 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.
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
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