Employment contract restraint clauses, restrictive covenants, post-termination restraints - call them what you will, the legal minefield remains to be overcome.
For employers, the need to know how far it will be legitimate and proper to include a restraint clause in an employment contract. For employees, particularly senior executives, the need to know whether the clause is likely to be legally enforceable and whether it is better to object to it now or to let it lie and do so later. And if an existing clause leads to a live dispute when the employment relationship is over or soon to be ending, whose case is the stronger.
For employers, the need to know how far it will be legitimate and proper to include a restraint clause in an employment contract. For employees, particularly senior executives, the need to know whether the clause is likely to be legally enforceable and whether it is better to object to it now or to let it lie and do so later. And if an existing clause leads to a live dispute when the employment relationship is over or soon to be ending, whose case is the stronger.
You may be an employer, wanting to know how far you can protect your business against competition from ex-employees after they have left. You may be an employee wondering why you have been asked to sign up to something that looks inconsistent with a new career opportunity. What does the law have to say about these issues?
In summary, restraint clauses in employment contracts can be legally sound. They have to protect an interest that the law recognises, and to be reasonable in scope and duration. A sensible looking clause may fall down straight away, while an onerous one stands up. It all comes down to knowing the nature of the business and the employment duties, whether in interpreting a clause or drafting one. The issues may involve: -
1. The right to compete after termination, or to prevent this;
2. How far a customer base can be protected from an ex-employee’s enticement, or indeed dealings without enticement;
3. What scope there might be to ask former colleagues to defect, or to put a stop to it;
4. Protection for confidential information and trade secrets, such as customer databases.
Tricky issues, without a doubt. Issues where we can help.
Restraint Clause Disputes
In summary, restraint clauses in employment contracts can be legally sound. They have to protect an interest that the law recognises, and to be reasonable in scope and duration. A sensible looking clause may fall down straight away, while an onerous one stands up. It all comes down to knowing the nature of the business and the employment duties, whether in interpreting a clause or drafting one. The issues may involve: -
1. The right to compete after termination, or to prevent this;
2. How far a customer base can be protected from an ex-employee’s enticement, or indeed dealings without enticement;
3. What scope there might be to ask former colleagues to defect, or to put a stop to it;
4. Protection for confidential information and trade secrets, such as customer databases.
Tricky issues, without a doubt. Issues where we can help.
Restraint Clause Disputes
“My best salesman has walked out. He’s already been on the phone to my most valuable client. I can’t understand where he’s got all his information from. What can I do?”
“I’ve only been in my new job for a week and I’ve had a stinking letter from my ex-managing director. He can’t stop me earning a living, can he?”
Disputes involving post-termination restraint clauses can be complex and far reaching. A business may face financial ruin if it does not act promptly to gather the right kind of evidence and stop wrongdoing in its tracks. A bright young executive might be thrown off a promising career path in the face of a browbeating letter that might have no real substance to it, but serves the purposes of the old boss by frightening the new boss.
You will want to know if you have a good case for making a threat or standing up to one. For pursuing a damages claim or resisting one. And in the most extreme cases, you may need advice on the merits and drawbacks of asking for an early injunction or possibly something even more drastic – or you may be faced with a legal claim and an imminent court hearing that you could never have expected.
New and unexplored issues, most likely. But fortunately, not for us. We can provide prompt expert advice and help you decide whether to press ahead with a claim relating to employment restraint clauses, to resist such a claim, or to look for a sensible commercial settlement.
If you need help on a restraint clauses problem, call David Cooper on 0121 325 5402.
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