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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 73894
Experience:  Qualified Solicitor
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I am hoping to leave my current employer in the near future

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I am hoping to leave my current employer in the near future with the intention of setting up a company that would compete in the same market place. Below is the wording in my contract relating to non solicitation and I was wondering if someone could give me a worst case scenario on what they could do to make my life difficult! My intention is to honour the 6 month clause and spend 6 months getting everything ready to launch so that after 6 months is up I can launch the business hassle free. However, can I launch the business before 6 months is up but only directly approach customers that I have not personally been in contact with for 12 months? If so, can I advertise on LinkedIn etc (even though existing customers would see it)? Any help would be appreciated.15. CONFIDENTIAL INFORMATION15.1 You must not use or disclose either during or after termination of your employment with Workstories Ltd any Confidential Information (as defined) acquired in the course of your employment.
15.2 Confidential information means trade secrets or information relating to the interests, business or systems of Workstories Ltd, and its Associated Companies, clients, customers and/or providers/suppliers, including but not limited to details of clients including their terms of business with Workstories Ltd or proposed terms, proposed non-disclosure agreements, price lists or pricing structures, sales figures and sales and marketing strategies, financial information and business plans, terms of business and relationships with suppliers, and employee information including terms of employment.
15.3 On termination of employment you must return any Confidential Information and any other files, documents or information relating to the business of Workstories Ltd or any of its Associated Companies which are in your possession and you must not retain any copies.18. NON SOLICITATION
You hereby agree that:
18.1 without the written consent of Workstories Ltd, you will not for a period of one month after termination of your employment be employed or engaged by or otherwise involved in the carrying on of any business similar to or in competition with the business of Workstories Ltd, and/or any of its Associated Companies, with which you were involved whilst employed by Workstories Ltd, and whether on your own behalf or on behalf of any person, firm or company, directly or indirectly;
18.2 for a period of 6 months after termination of your employment with Workstories Ltd you will not seek to procure orders from, do business with or act for in any capacity, any customer of Workstories Ltd or any of its Associated Companies, being a person with whom you dealt in the 12 months prior to the termination of your employment.
18.3 for a period of 6 months after termination of your employment with Workstories Ltd you will not endeavour to entice away from Workstories Ltd any person who has at any time during the period of 12 months immediately preceding the date of termination of your employment been employed or engaged by the Company or any of its Associated Companies.
18.4 PROVIDED ALWAYS that nothing in this clause shall prohibit you from seeking or procuring of orders or the doing of business not related or similar to the business or businesses carried on by Workstories Ltd or by any of its Associated Companies.
JA: Have you discussed the termination with a manager or HR? Or with a lawyer?
Customer: No
JA: What is your employment status? Are you an employee, freelancer, consultant or contractor? Do you belong to a union?
Customer: Permanent contract employee
JA: Is there anything else the Lawyer should know before I connect you? Rest assured that they'll be able to help you.
Customer: no

Hello, I’m Ben. It’s my pleasure to assist you today. I may also ask for some preliminary information to help me determine the legal position.

What are you ideally hoping to achieve in the circumstances, please? Please note this is not always an instant service and I may not be able to reply immediately. However, rest assured that I am dealing with your question and will get back to you today. Thanks

Customer: replied 11 days ago.
Hi Ben, I just need advice really. I hope to achieve being able to launch my business as quickly as possible after leaving my current employer. There is no ill feeling but obviously the quicker I can start trading the better!

Thank you very much for clarifying. It is common for employment contracts to contain post-termination restrictive covenants, which restrict the employee’s activities once their employment terminates. An employer would understandably want to protect their business from a departing employee's knowledge of confidential information, business connections, influence over clients, suppliers, staff, etc. However, a covenant that restricts an employee's post-termination activities will be automatically unenforceable by 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.

The first thing to consider is what legitimate business interests (LBIs) can the employer try and protect? The most common ones are:

- Goodwill (trade connections with customers and suppliers)

- Trade secrets and confidential information

- Stability of the workforce (preventing poaching of employees)

If they are trying to protect an LBI, any relevant restriction must be drafted no wider than is reasonably necessary to protect that interest. Generally, the courts would try and balance the interests of the employer's business and the employee’s right to freedom of movement and earning a living.

Non-solicitation covenants are used to prevent an employee from enticing away their ex-employer’s clients. Solicitation generally requires a direct and specific appeal to a client to encourage them to transfer their business; and a personal connection to be able to influence such a move in the first place. There has to be a positive act by the employee such as to "tempt, lure or persuade” the client to do business with them. Ideally, the restriction should be limited to specific customers with whom the employee had contact during a specified period before leaving, or with which they enjoy a close business relationship. If the employee initially brought the clients to the employer when they started working there will not in itself stop a non-solicitation covenant from applying, although it may be a factor relevant to the length of the restriction. Also, if a client no longer wants to do business with the former employer, that will not be relevant in deciding whether or not to uphold the restriction.

Non-competition covenants prevent an employee from working with a competing business or setting up to work in competition with their ex-employer. A covenant simply wishing to prevent competition will not be enforceable, especially as competition is generally seen as healthy for consumer rights. However, a non-competition covenant trying to protect an LBI can be. Such covenants will generally only be 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 duration of the restriction can be important, with 6 months usually seen as the maximum in standard situations and anything longer can be seen as unreasonable.

Restrictive covenants are often used as a scare tactic by employers, hoping that an ex-employee will simply not attempt to breach them in order to avoid potential legal trouble. However, if the restrictions are allegedly breached, the employer has the right to take the matter further. The following legal remedies are available to them:

- Injunction – an order of the court to stop the ex-employee from doing certain things that would make them in breach of the restrictive covenants, such as not to contact certain clients, not to use certain confidential information or not to work for a specific competitor. It can also instruct them to deliver up certain confidential information, which they may have tried to use

- Damages - compensation for loses which have directly resulted from the breach of the covenants, although it would only be possible if such losses are identifiable. This will normally include loss of profits on contracts or opportunities, which have diverted by the employee. It is potentially also possible to make a claim against the ex-employee’s new employer, if they had knowingly or intentionally induced the employee to breach their covenants

In summary, there are various factors which deal with the reasonableness and enforceability of 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. In the end, only a court can decide if a covenant is legally enforceable, so unless the employer goes to court and succeeds, they will only be able to rely on the employee’s own compliance with the restrictions.

Hopefully, I have answered your query in a way that is simple and easy to understand. If anything remains unclear, I will be more than happy to clarify it for you. In the meantime, thank you once again for using our services.

Customer: replied 11 days ago.
Hi Ben, that's all clear. In this case I think a court would definitely feel a 6 month non compete clause would be to protect a LBI so would like to stay on the right side of my contract! The business is selling furniture to trade accounts. With the wording in the clause would I be able to set the business up but not launch until the 6 month period had ended or would I have to wait 6 months before I could set anything up? If I can launch, can I sell to their customers as long as I haven't had any contact with them in the last 12 months? For example, I look after the South West territory, could I launch the business but only make contact with people in the South East, London, Midlands and the North?

Hello, thank you for your further queries, I will be happy to answer these. You can still set up without actively doing any business or generating leads, etc

If, in the 12 months preceding your termination, you have not dealt with the customers you want to approach then these should be excluded from the restrictions and you can do business with them if needed

Customer: replied 11 days ago.
That's great, final question! If I was contacted by a customer wishing to procure from me would I just have to tell them that I am unable to do so until the 6 month period has expired? What I'm getting at, is can I advertise the business on LinkedIn for example but simply not trade with certain companies?

you can still have the business and advertise it as long as you do not breach the restrictions in the process, such as work with a restricted customer. If one of these approaches you then it is best to advise them you cannot deal with them for a set period of time due to the restrictions

Customer: replied 11 days ago.
Fantastic, I really appreciate your help.

You are most welcome. If you have any further questions about this then please do not hesitate to get back to me and I will be glad to help. All the best

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