We have recently introduced a candidate to an employer where a restrictive covenant was used which must surely fall foul of rather a lot of employment regulations!
The role is a fairly junior fee earner position and not senior management or director level.
The restrictive covenant was actually called a “non-compete clause” and included the following:
|1.||Not to directly or indirectly compete with the business of the company…during employment or for a period of 3 years after termination of employment.|
|2.||Not allowed to contact…any client or prospective client the employee had dealings with during employment.|
“Not compete” is defined as the employee not owning, manage, operate, consult or be employed in a business similar to or competitive with the company.
We think this clause has the following implications:
1. The employee could be sacked at any time and would not be able to work in the same industry for 3 years.
2. The employee could not leave and set up his own business.
3. The employee could not do any work for any existing family or friends etc..
4. For three years after leaving this company the employee would need to work in another industry or claim jobseekers allowance.
I suspect this level of extremity is perhaps suitable for a senior director of a business, but not a junior member of staff!
Quite rightly, the junior member of staff almost ran a mile when reading this and refused point blank to sign the contract of employment until it was removed. It didn’t exactly start the employee/employer relationship off in a good way!
I am aware that there are numerous solicitors firms out there with anecdotal evidence as to how seriously restrictive covenants should be taken as the courts do uphold them from time to time, but in all the time we have been operating (17 years and counting) I have never come across one where an employer has actually enforced the covenant. Presumably if a manager left and opened an office next door to their former employer it may be worth contemplating taking a punt to get him/her shut down as quickly as possible, but otherwise the economic benefit of pursuing an ex-employee is probably minimal.
If you get offered a job and one of these clauses is included, you have a few options:
1. Sign it on the basis you doubt the employer will ever bother enforcing it.
2. Refuse to sign it until the clause is removed.
3. Go back to the employer and ask for the clause to be amended to something more sensible.
We imagine that a 12 month time limit and perhaps a geographical restriction to say 1-3 miles from the employer’s offices is more suitable and fair to both sides.
Employers need to think carefully about souring a potentially good and long lasting relationship before imposing any onerous restrictions on future work..