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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 73840
Experience:  Qualified Solicitor
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I would like some advice on what actions I should take to

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Hello,
I would like some advice on what actions I should take to manage a non-compete clause from my former company. I will be joining a new company that completes partially with my former company before my 6-month non-compete clause ends. How should I deal with this clause if the new competitor is an indirect competitor? Should I share my non-compete clause with the new company before or after signing my new employment contract?Many thanks
Tiff

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.

How long had you worked for your former employer? and please copy and paste the relevant clause/s on here

Customer: replied 6 days ago.
Hello Ben, I've worked for my former employer for 1 yr 8 months and will be terminating my employment in July. I'm due to start with the new company in August.

OK thank you. Please copy and paste the relevant clause/s from your former employer's contract on here

Customer: replied 6 days ago.
16 Post Termination Restrictions
16.1 In order to protect the Confidential Information, business connections and workforce of the
Company to which you have access as a result of your employment, you covenant with the
Company (for itself and as trustee and agent for each Group Company) that you will not:
(a) for 6 months after the Termination Date, be involved in any Capacity with any business
concern which is (or intends to be) in competition with any Restricted Business;
Customer: replied 6 days ago.
b) for 6 months after the Termination Date be involved with the provision of goods or services
to (or otherwise have any business dealings with) any Restricted Customer in the course of
any business concern which is in competition with any Restricted Business; or
(c) for 6 months after the Termination Date solicit or endeavour to entice away from the
Company the business or custom of a Restricted Customer with a view to providing goods or
services to that Restricted Customer in competition with any Restricted Business; or
(d) for 6 months after the Termination Date solicit or endeavour to entice away from the
Company the business or custom of a Prospective Customer with a view to providing goods
or services to that Prospective Customer in competition with any Restricted Business; or
(e) for 12 months after the Termination Date in the course of any business concern which is in
competition with any Restricted Business, offer to employ or engage or otherwise endeavour
to entice away from the Company any Restricted Person;
(f) for 12 months after the Termination Date in the course of any business concern which is in
competition with any Restricted Business, employ or engage or otherwise facilitate the
employment or engagement of any Restricted Person, whether or not such person would be
in breach of contract as a result of such employment or engagement;
(g) solicit, facilitate the solicitation of or canvass the supply of services from any Restricted
Supplier where such supply is likely to be to the detriment of the Company whether by causing
the Supplier to reduce or alter the terms or quantity of supply to the Company or where the
value of the Company’s arrangement with the Supplier is diminished; or
(h) at any time after the Termination Date, represent yourself as connected with the Company in
any Capacity, other than as a former employee, or use any registered business names or
trading names associated with any Group Company.
Customer: replied 6 days ago.
16.2 None of the restrictions in clause 16.1 will prevent you from:
(a) holding an investment by way of shares or other securities of not more than 5% of the total
issued share capital of any company, whether or not it is listed or dealt in on a recognised
stock exchange;
(b) being engaged or concerned in any business concern insofar as your duties or work will relate
solely to geographical areas where the business concern is not in competition with any
Restricted Business; or
(c) being engaged or concerned in any business concern, provided that your duties or work will
relate solely to services or activities of a kind with which you were not concerned to a material
extent in the 12 months before the earlier of Garden Leave or the Termination Date.
16.3 The restrictions imposed on you by this clause 16 apply to you acting:
(a) directly or indirectly; and
(b) on your own behalf or on behalf of, or in conjunction with, any firm, company or person.
16.4 The periods for which the restrictions in clause 16.1 apply will be reduced by any period that you
spend on Garden Leave immediately before the Termination Date.

Thank you. Please do not worry and leave it with me for now; I will get back to you with my answer as soon as I can which will be at some point today. The system will notify you when this happens. Please do not reply in the meantime as this may unnecessarily delay my response. Many thanks.

Customer: replied 6 days ago.
16.5 If you receive an offer to be involved in a business concern in any Capacity during your
employment, or before the expiry of the last of the covenants in this clause 16, you must give the
person making the offer a copy of this clause 16 and you must tell the Company the identity of
that person as soon as possible.
16.6 The Company and you have entered into the restrictions in this clause 16 having had the
opportunity to take separate legal advice.
16.7 Each of the restrictions in this clause 16 is intended to be separate and severable. If any of the
restrictions is held to be void but would be valid if part of their wording were deleted, such
restriction will apply with such deletion as may be necessary to make it valid or effective.
Customer: replied 6 days ago.
I've just pasted the relevant clauses above. Thank you Ben, looking forward to your response.

Many thanks for your patience, I am pleased to be able to continue assisting with your query now. there is no legal obligation on you to share these restrictions with the new employer but you can of course make them aware of them so that you maintain a good degree of transparency and trust between you and them. Whether you do so before or after you sign your contract will not affect your legal rights much, apart from the fact that if you do so beforehand and they are not happy to take the risks, they may pull the plug on the role before you accept it. Even once it is accepted, they can still terminate the contract but would at least need to give you notice. Hopefully it will not go that far.

As far as the legal position with the restrictions is concerned, 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.

Ben Jones and 3 other Law Specialists are ready to help you
Customer: replied 6 days ago.
Thank you Ben, your advice is really helpful and it makes a difference in my understanding of relevant clauses and their practical implications.

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