Spring is all about new beginnings. As the weather warms up, job opportunities often blossom. But, in the excitement of taking the next step along your career path, be careful of any restrictions relating to your current employment. Businesses may legitimately protect their interests with reasonable restrictive covenants. Ignoring these may bring a turbulent start to your new job rather than the exciting opportunity that you are looking forward to.
What is a restrictive covenant?
Consultancy and employment contracts, particularly for senior staff, often contain clauses restricting working activity if you leave a business. These are known as post-termination restrictive covenants, as they are intended to prevent damage to a business by an ex-employee. They usually relate to working in competing businesses, dealing with clients, and poaching other staff members.
Isn’t restricting my right to work illegal?
In principle an agreement that restrains trade and prevents an individual earning a living is against public interest and unenforceable. But the law recognises that it is also in the public interest to allow businesses to protect their confidential information, customer connections, goodwill, and workforce stability. A court, when considering the details of each case, will look to balance these interests, and enforce restrictive covenants if they are reasonable. Please, do not therefore assume that a clause which restricts your right to work is unenforceable.
What types of restrictive covenants may be enforceable?
The reasonableness of restraints depends on the circumstances of each case, but the types of restrictions generally considered enforceable and which you may find in your employment contact are:
- Non-compete clauses – that prevent ex-employees from working for a competitor for a specified length of time.
- Non-solicitation of clients/customers clause – that stop ex-employees from approaching customers/clients of the former employer with a view to obtaining their business.
- Non-dealing clause – that prevent ex-employees from having any dealings with clients, customers, or suppliers of the former employer, even if that person approaches the ex-employee first.
- Non-poaching of staff clause – that stop ex-employees from approaching former colleagues and enticing them to join their new company.
General employment duties
Whether or not your old employment contract contains express restrictive covenants, the law accepts that while employed you must behave honestly and faithfully towards your employer. Therefore, obligations that relate to this duty will be implied into your employment relationship even if they are not expressly stated in your contract. This includes the duty not to use or disclose confidential information gained in the course of employment, especially in relation to trade secrets. This obligation carries on after the end of your employment. You may also breach your implied duty of fidelity by preparing to compete with your employer once you leave while you are still an employee by, for example, copying customer lists, or taking home confidential information.
What can I do to prevent an adverse reaction to my new job?
As you look forward to taking up your new position, there are some steps that you should take to make sure that you meet all your express and implied duties to your current employer:
- Check your current employment agreement to see if it refers expressly to restrictions post-termination. If you are both an employee and a shareholder in the company, be mindful to also check whether you have any restrictive covenants in your shareholders’ agreement.
- If you appear to be subject to restrictions which will make it difficult to start or perform your new job, please consider obtaining professional advice on the enforceability of the restrictions. If they are unreasonably wide they may not be enforceable.
- If you brought clients to the business when you started work at your current employer because they wanted to deal with you personally, be sure that you have a clear written record of these people in case they choose to follow you rather than remain with your ex-employer. But please consider advice if you think this is likely so that you have clarity about what you can and cannot do in these circumstances.
- Do not make digital or hard copies of any confidential information, designs, diagrams, lists or contact information which belongs to the business. Make sure that you return all versions of this kind of information to your ex-employer.
- Return all equipment to your ex-employer, including computers, laptops and mobile phones.
Ensuring a good start in your new job
If your ex-employer believes that you are in breach of restrictions specified in your employment contract, they may take legal action against you. Your new employer may be joined in this action if they are thought to be complicit in this breach. To avoid this, if you do have restrictions in your old employment contract, do inform your new employer, and discuss with them how this affects your new role. This will be preferable to them being unexpectedly dragged into a dispute with your ex-employer.
Spring cleaning to prevent hay fever
This spring, as you look forward to starting a position, make sure to give your old job a through spring clean – deleting, destroying, or returning all information and assets that belong to your ex-employer and be mindful of all your implied and express obligations. Please take professional advice to ensure that in taking up your new position you do not fall foul of any enforceable post-termination restrictive covenants. Take simple steps to end your employment well, so that from the end of one job will spring a happy new beginning.
If you would like to discuss any of the points raised in this article, please contact Emily-Jade Hodson, a solicitor in our Commercial Litigation team dealing with contentious commercial matters including breach of contract disputes, restrictive covenant advice and intellectual property matters.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
