Business Brief: Taking Clients When You Leave

Nick Hine, partner at law firm Thomas Eggar, responds to your employment law questions:

I have been offered a job by a competitor of my current employer who essentially wants me to bring as many clients as I can with me to this new role. There are some restrictions against me doing this in my contract but are they worth the paper they are written on? Could they prevent me from doing my new job at the competitor company?
-- name witheld
Many contracts contain what we lawyers call "restrictive covenants". They are clauses in an employment contract which continue after the termination of the employment relationship. The general principle is that an employee is free to work for whoever he/she chooses. However, a business is entitled to protect its legitimate business interests but only as long as is reasonably necessary to do so. This sounds very lawyerish but what does this actually mean in practice?

The main restrictions, which many employers include within contracts, is non-solicitation and non dealing with clients (can include prospective clients) for a period of time after the termination of the employment relationship. If these are well drafted and for a reasonable period (i.e up to a maximum of 12 months) then they may be enforceable. However, this would depend on the seniority of the employee in question.

In addition to this, the contract may include the non-poaching of senior or key employees for a reasonable period (i.e again up to a maximum of 12 months).

A lot of employers do not have well drafted clauses so it is always worth having them reviewed when leaving your employment. If these main restrictions don't go far enough to protect the company's legitimate business interests, then a non-competition clause will potentially be upheld.

This type of clause seeks to prevent an individual from working for a competitive organisation or setting up in competition for a limited period of time, although the time frame here is often shorter as it may prevent an individual from working.

Therefore, any individual who is looking to go and join a competitor or to set up in competition should have their contract reviewed by a lawyer to see what restrictions are in place, how well they are drafted and whether or not they are likely to be enforceable.

Getting this wrong can be an expensive and time consuming mistake. The old employer may be able to get an injunction (court order) preventing you from joining a competitor for a period of time and also ensuring the enforceability of it's clauses as outlined above.

Damages for breach of contract may also follow. I would say this, but always seek advice in these circumstances.

If you have any questions for Nick Hine, post a comment below, or email editorial@bnet.co.uk