Contract of employment and restrictions on leaving.

[sweepo]

Is it legal for a contract of employment with a company to state that you can not leave your position to work for a named competitor or any other company in the same field? Surely this is limiting your field of employment and a restriction of trade? Any advice gratefully received!

[woofgang]

yes it is...if you don't want to comply then don't take the job. It is done to stop you taking their contacts, techniques and any other valuable knowledge you might acquire and using it to benefit a competitor.

[Hymie]

Such contracts are unenforceable in a court of law – otherwise Tesco would insist all their staff cannot work for its major competitors, effectively making them captive employees.

Although Ethel (where is she now?) would disagree – but when asked, could not cite an action brought by an employer in relation to such a restrictive contract.

[Eve]

I don't think restrictive (restraint of trade) covenants generally are outright unenforceable, it depends on a number of things, the covenant, its reasonableness, the circumstances etc...

[FredPuli43]

It is and it isn't ! It might be seen as an unfair contractual term. For example, such terms are frequently encountered in contracts for hairdressers. These provide that the party is not to work for or set up in business within a certain area around the premises of the employer. The idea is that customers like a particular employee doing their hair, and that employee knows them. If he or she leaves, they might take the customers too. If they have to go more than a few miles, they won't follow; set the minimum distance too far and it becomes unenforceable as unreasonable. It's an unreasonable restraint on the employee's right to work, and unreasonable restraint on trade.

Naming a competitor is an attempt to make the term fair but saying any in the same field looks, at first reading, to be too much. But that very much depends on the nature and scope of the restriction. Do you have knowledge of some trade secrets which are known only to your employers, and unique to them, about , say, some process they are developing, or will gain some once you are employed? What reason do they give for such a restriction ?

[sweepo]

Thanks all for your answers. It's a technical sales position and there is no intellectual property involved.

[Hymie]

Since I am in a minority of one – it should be very easy for the others to find reports of successful actions brought against those breaking their contracts.

I don’t believe that no one has ever broken such a contract; just the employer’s solicitor laughing at them when they say they want to sue.

[woofgang]

I think it depends on what the person does. If you are someone who has access to proprietary information or valuable contacts, its not unreasonable to expect an employee not to be headhunted to a similar organisation and give them that knowledge.

[woofgang]

sweepo, they will be wanting to guard against your building up a lucrative network of contacts and taking it with you.

[hc4361]

These contracts ARE enforceable.

""Over the course of the past 24 months, Hays has brought a number of claims against former employees and competitor agencies to protect its business interests."

http://www.telegraph....inkedIn-contacts.html

http://www.birketts.c...employment-contracts/

The Hedgehog Golf Company Ltd v Frank Hauser [2011]

[FredPuli43]

Don't think it was claimed that they were never enforceable, not by me anyway, hc. The cases you cite were all examples of confidential information being used, or potentially used, by people in trusted positions, to destroy the complainant party's business or very severely affect it. Effectively, the defendants were stealing the business, or planning to do so, by using confidential information in a massive breach of trust. You wouldn't always need an express term in a contract to take action to stop that.

But it's difficult to see, prima facie, how a salesman, even a technical one, with no such information to sell or use, is properly subject to an enforceable term as broad as the one described (or at all). Salesmen do not normally have a 'following' either. Clients don't say " I was so happy to be sold X's product by him, that I must go and buy Y's product instead, from him now he's moved". You can imagine a car salesman selling Toyotas who moves to Ford. He'll probably be rude about Toyotas, and their technology, and praise Fords, when he had done the reverse but that's just how life is. and has to be accepted.

[hc4361]

Salesmen have client lists which they can use to entice business to the new company.

If they hadn't been employed by the original company they would not have built up such a database.

[solvitquick]

I am surprised to find it written into your contract. This practice is generally agreed between most large companies between themselves. However as you accepted the contract and presumably signed up to it what is your grouch now? I don't think you have a legal leg to stand on, as the courts reconise the need for trade secrecy. Indeed trade secrecy is often legally used to refuse to answer questions from any investigatory body if it would damage their commercial interests. A simple example, do you think Coca-Cola would allow a staff member with sensitive information to join Pepsi-Cola OR VICE VERSA? The staff may not have it in their contacts but I bet neither company would employ either's staff.
If you wish to leave your present job then join a company in a totally differents sphere than your current one.

[solvitquick]

Hymie, your reference to Tesco is a spurious example if you are referring to mere couter-staff or shelf-stackers, I doubt that they could not be employed by ASDA, Morrisons etc. But staff with commerially-sensitive info. e.g. financial managers, buyers, accountants are unlikely to be employed by competitors, whether in their contracts or not. The supermarkets or other competitors probably have an unwritten agreement not to employ such staff - and quite reasonble too. Grow up regards the real world sweepo!

[sweepo]

Thanks all for your comments. Solvitquick - I'm very much in the real world ta, however not being an employment lawyer I'm asking for some advice from those who are more knowledgeable than myself in these matters! The answers have been most informative, thanks.

[jake-the-peg]

The cases hc4361 cites in those links are not the same - they deal with disclosure of information to subsequent employers that is not the same as restricting the companies that can employ you.

If you do work for a competitor subsequently you have to keep such information confidential - in my company we are actively told that no such information from previous employers may be disclosed.

I'm pretty sure that contracts restricting who you can work for are unenforceable under European Law - my (US) employer tried to include them and they were dropped.

In practice employees at a senior level are often subject to a long notice period where they're still employed but not allowed on the premesis or contact - so called "Gardening leave"