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Ross Miller
Ross Miller,
Category: Employment Law
Satisfied Customers: 429
Experience:  Director (Litigation and Mediation) at Hilltop Solutions
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I have a few questions regarding restrictive covenants.

Customer Question

I have a few questions regarding restrictive covenants.
Submitted: 2 months ago.
Category: Employment Law
Expert:  Ben Jones replied 2 months ago.

Hello, my name is***** am a qualified lawyer and I will be assisting you with your question today.

Expert:  Ben Jones replied 2 months ago.

Please provide some more details of your situaiton

Customer: replied 2 months ago.
11/07/2019 12:23
I am currently working for a small engineering software company. I sell the software in South East Asia and Africa region and do a bit of social media marketing. This is a small niche industry in which there are only like 10-20 companies worldwide and all my experience has been in this industry.Anyways, I now have an offer from another German software company with only 1 employee in the UK. They have a number of products but one of the product (major) is in direct competition with my current software. This new company has offered me that for the first 6 months I can work on new products (different from my current employer) and different regions.I am now on garden leave after I informed my current employer that I am joining the competitor.They have also threatened me with a lawsuit . I am certain that I am going to receive an email in from the from the company/solicitor by next week because I have a six month no compete agreement.
Question 1 : My questions is what do I do when I receive the threatening letter from the solicitor/current employer?
Question 2: Now that I am on gardening leave , can I join the new company after my gardening leave or notice period is over?
Question 3: I will be selling their new products in the UK which do not compete with the current employer's product and other products in India and other regions where I have not worked or sold before? Will this strategy be enough to get away from the restrictive covenant?
Question 4: What should the new employer do to ensure that they are on the safe track to hire? Is there any precaution you would recommend?
Question 5: Can you also go through the restrictive covenant in my contract and advise on do's and don'ts ?
Customer: replied 2 months ago.
I have the details of the restrictive covenant.
Customer: replied 2 months ago.
Here is the restrictive covenant below.APPENDIX C
1. In this Appendix unless the context otherwise requires the following expressions shall have the
following meanings:-1.1 “the Business” the business of the development of software and the
provision of consultancy services or any part thereof carried on by the
Company as at the Termination Date and during the period of 12 months
prior thereto and any other business carried on by the Company at the
Termination Date to which you have rendered services or about which you
have acquired Confidential Information or by which you have been engaged
at any time during the period of 12 months prior to the Termination Date;
1.2 “the Restriction Period” the period of 6 months following the Termination
Date;
1.3 “Senior Executive” a person who at any time whilst you were employed by
the Company:-
1.3.1 is or was engaged or employed (other than in a clerical, secretarial or
administrative capacity) as an employee director or consultant of the
Company; and
1.3.2 is or was engaged in a capacity in which he obtained Confidential
Information; and
1.3.3 is or was engaged at any time during the period of 12 months prior to the
Termination Date.2. The parties hereto agree and acknowledge that it is reasonable and necessary for the protection of
goodwill, trade connections and stable workforce of the Business that you should be restrained in
the terms of the covenants contained herein from making available or using for the benefit of
yourself or a competitor or potential competitor Confidential Information or trade connections
which you have obtained and are likely to obtain in the course of your employment as an executive
of the Company. In particular the parties acknowledge that:-
(i) in the course of some of the specific duties which you are to carry out, you will inevitably obtain
Confidential Information in relation to the Company;
(ii) you could not work in any senior position for a competitor of the Company without being
likely or tempted to make use of that Confidential Information for the benefit of that competitor and
to the detriment of the Company because you could not simply ignore or forget that Confidential
Information when carrying out your duties for any such competitor; and
(iii) in view of your position as an executive of the Company you will have direct and close access
to the customers of the Business and it is reasonable to protect the trade connections of the
Business.
3. You accordingly covenant with the Company that in view of the circumstances referred to in
paragraph 2 of this schedule, you will not (other than for and on behalf of the Company) without the
prior written consent of the Company (such consent to be withheld only so far as may be reasonably
necessary to protect the legitimate interests of the Company) directly or indirectly:-3.1 at any time during the Restriction Period:-
3.1.1 in relation to a business which may in any way be in competition with the
Business perform any services or supply goods to any person firm or
company who shall have been a client or customer of the Company and with
whom you shall have had contact or dealings or for whose relationship with
the Company you shall have had responsibility or about whom you became
aware or informed in the course of your employment at any time within the
period of 12 months prior to the Termination Date; Finite Element Analysis Ltd 2013 Document: Employment Terms and ConditionsIssue: 19.0 27 Revision Date: Nov-13
3.1.2 canvass solicit or approach or cause to be canvassed solicited or approached
in relation to a business which may in any way be in competition with the
Business the custom of any person who at the date hereof or at any time
during the period of 12 months prior to the Termination Date shall have been
a client or customer of the Company and with whom you shall have had
contact or dealings or for whose relationship with the Company you shall
have had responsibility or about whom you became aware or informed during
such period; or
3.1.3 offer employment to or employ or offer to conclude any contract for services
with or engage any Senior Executive or procure or facilitate the making of
such an offer by any person firm or company who shall be in competition
with the Business within such Restriction Period; or
3.1.4 solicit or entice any Senior Executive to leave his employment with or cease
his directorship of or consultancy with the Company’; or
3.1.5 (except as the holder, by way of bona fide investment only, of shares or
securities listed, dealt in or traded on a recognised stock exchange not
exceeding 5% in nominal value of the securities of that class) be engaged or
concerned or interested or participate in a business the same as or in
competition with the Business anywhere in England, Wales, Scotland,
Northern Ireland, Eire or any other country in which the Company operates
or operated in the period of 12 months preceding the Termination Date.
3.2 at any time:-
Customer: replied 2 months ago.
Just wondering if these questions are still open and I will be getting reply for them.
Expert:  Ben Jones replied 2 months ago.

Thanks but as this is quite a lengthy query and I am in court today I won’ be able to help so will opt out for someone else thank you

Expert:  Ross Miller replied 1 month ago.

Hi there I work as an employment lawyer and would be happy to give you advice on this matter. I will address the questions as best as I can but for clarity it is impossible to give a definitive answer on this matter, but I will explain why..

Question 1 : My questions is what do I do when I receive the threatening letter from the solicitor/current employer? The standard practice would be to take out an injunction to stop you from breaking the restrictive covenant however, if you accept the job the may look to take legal action, at this point you would be best advised to instruct a local solicitor who specialises in this area.

Question 2: Now that I am on gardening leave , can I join the new company after my gardening leave or notice period is over? Once you garden leave/notice expires then you are no longer employed by the first company, DO NOT accept the job whilst on garden leave or you would be in breach of contract and that would cause additional issues.

Question 3: I will be selling their new products in the UK which do not compete with the current employer's product and other products in India and other regions where I have not worked or sold before? Will this strategy be enough to get away from the restrictive covenant? I will address this in my response below.

Question 4: What should the new employer do to ensure that they are on the safe track to hire? Is there any precaution you would recommend? The restrictive covenant binds you and not the new company however, you may wish to make them aware of the situation if you are confident it will not affect your employment.

The fact about restrictive covenants is that they are not always enforceable even if the first employer takes legal action against you. From the information you have given it would appear that your new employment could not reasonably have an effect on your previous employers business on the assumption you will not be breaching any contractual obligation in relation to other aspects such as "inside knowledge". Previously companies have tried to enforce restrictive covenants and failed due to the covenant being too "wide" in their application. Also given that you are working in such a specialist area, there is case law which states that if you were to be unable to work as a result of the RC then it cannot be enforced. Given the limited work available to you in your area then it would of course be advisable to take the job. However, your previous employer may with to take legal action against you. If they do this you would have to instruct a solicitor to deal with this matter (employment lawyer) you would have to go to a tribunal and give evidence to show reasons as to why the covenant cannot be enforceable on the grounds of being too wide in its application and that you would suffer a detriment as a result of the enforcement of the RC. The reason I state that I cannot give a definitive answer is due to the fact that a final decision would go on the merits of your presented evidence. I would be irresponsible not to advise you that there is of course risks in litigation but there has been quite a few cases where the court have decided that the RC's cannot be enforced.

I hope this has answered your question. I would be obliged if you could "accept" the answer on the webpage if leave some feedback should you have the time. I wish you all the best with your situation.

Kind regards

Expert:  Ross Miller replied 1 month ago.

Has this answered your question?

Customer: replied 1 month ago.

Hi Ross, Thank you very much for your answer. It is very helpful. The last question I had in my mind was the fee-related. If the employer goes to the court and wins the case, what type of fees would I be liable to? For instance, would I also be liable to their lawyer's fee? The company could really afford fancy lawyers but I can't really afford a lawyer for myself. If I would be liable to their lawyer's fee, the court fees, and my own fees, I might well go bankrupt. If I am only liable to the court fees, I would potentially withdraw when it reaches the court. I believe in that case I could get away with a minimal court bill. What I want to ensure is, either way, I don't want to go bankrupt. Do you have any general advice on this topic? Many many thanks, *****************

Expert:  Ross Miller replied 1 month ago.

Thank you for your. email. This would really come down to what we call and application for costs. If you were to be successful in your hearing then you could argue that the other side were liable for your costs. Even if they were successful then it is not given that you will automatically be liable for their costs in the matter. In terms of the cost of solicitor usually you will have to shop around to see what different firms are charging. You may also wish to check your home insurance as some policies cover legal costs. Details of which would be in your policy. The reality is that you would have to take advice on this from your representation at the time, should this every become the scenario. I wish I could be more accurate but nothing about this is set in stone. I hope this has helped. Even in worst case if you were to lose and a cost application was made against you, you would be able to organise a payment plan which is reasonable as you cannot be expected to pay in one payment. If you do require to instruct representation then you can find a list of solicitors at https://solicitors.lawsociety.org.uk/ . Please let me know if you have any further questions.

Thank you, ***** *****

R.

Customer: replied 1 month ago.
Hi Ross,Thank you very much for your message and help.My company first sent me an email on 12th of July saying that they will make my final payment or the remaining pay or pay in the lieu of notice by the end of month. Yesterday (23 of July) was my last working day and today they are saying that the company will not pay me for the notice period.They have given me a reason that the pay included pre-paid commission on sales. Basically, during the visa application process it was required that my minimum salary be £ 36000/year. Last year in January, my company decided to increase my salary from £ 31k to £ 36k with the understanding that the £ 5k is pre-paid commission.Now they are saying that this pre-paid commission has to be paid back (it is not in my contract) by deducting it from my salary. During my visa application, it was entered that £ 36,000 is my fixed salary including any guaranteed bonuses. I have the visa application form and it is quite clear on the government/home office website that this is guaranteed salary.Now they are making unauthorised unlawful deduction, do you think I can get this money back?My commission was also eaten by other sales guys. Even if I made a sale all by my own, I had to share that commission with other sales guys (sort of discrimination). All my commission slips company kept it when I was leaving but if there is a way to get that commission form/receipts back I could also prove that I have been discriminated against or taken advantage of. They exploited my visa status.I don't want to make this too complicated but I believe if they don't pay me now the contract becomes void? What would you recommend?
Customer: replied 1 month ago.
I came across the below mentioned clause.You agree that for the purpose of the Employment Rights Act 1996 the Company
may apply any sums which may be due from the Company to you (including, without
limitation, accrued salary and/or holiday pay and/or any payment in lieu of notice) as
at the date of termination against any sums which may be due from you to the
Company and you further agree that, in the event of your failure to give notice of
termination of your employment, the Company may retain any such sum without
prejudice to its right to claim damages for any additional loss it may suffer as a result
of your failure to give due notice of termination.
Customer: replied 1 month ago.
Can they say that pre-paid commission is the money I owe them? Even if they say so, does this mean, they can just simply go ahead and deduct it from my salary without my consent? Can they say that we are going to pay you on 12th of July and later on 24th of July say that I owe them money?
Expert:  Ross Miller replied 1 month ago.

On the face of it I would say no, unless you have expressly made an agreement about this then they can't enforce it, the clause you are referring to is usually about if you have taken more holidays than you have accrued by the time you hand in your resignation. If they are not willing to pay you for your notice period and are not paying monies that they are due then I would look at firstly going to Acas you can call them on 0300(###) ###-#### If they are still not willing to pay you what you are due then I would look at raising a tribunal against the, for wrongful dismissal (this is your contract claim for not paying the notice) and also unlawful deduction of salary under the employment rights act. If you would like to discuss potential representation or even if you would like us to just send an initial letter to you employer the please contact myself on***@******.***. if you do contact me please give me a quick synopsis about this matter as I have a high volume of emails and don't want to cross wires with another claim. I look forward to hearing from you.

Thank you, ***** *****

Ross.

Expert:  Ross Miller replied 1 month ago.

On the face of it I would say no, unless you have expressly made an agreement about this then they can't enforce it, the clause you are referring to is usually about if you have taken more holidays than you have accrued by the time you hand in your resignation. If they are not willing to pay you for your notice period and are not paying monies that they are due then I would look at firstly going to Acas you can call them on 0300(###) ###-#### If they are still not willing to pay you what you are due then I would look at raising a tribunal against the, for wrongful dismissal (this is your contract claim for not paying the notice) and also unlawful deduction of salary under the employment rights act. If you would like to discuss potential representation or even if you would like us to just send an initial letter to you employer the please contact myself on***@******.***. if you do contact me please give me a quick synopsis about this matter as I have a high volume of emails and don't want to cross wires with another claim. I look forward to hearing from you.

I would be very appreciative if you could click “accept” on this answer and give me a positive rating. This will let the website know that I have responded to your query. You can feel free to continue to ask more follow up questions if you feel this is necessary.

Thank you, ***** *****

Ross.