04 June 2013
Read the small print? - how often do you read your Employment Contract? Lauren Hillier asks
When was the last time you read your Employment Contract? Probably not since you started your job, which may have been years ago, and maybe you only skimmed through it then, focusing on the interesting bits, like salary and bonus.
Understandably, you might have little or no idea of what is in your contract until something goes wrong which prompts you to dig it out and look at it again. So you might be in for a nasty shock if you discover that your contract contains non-compete clauses. These clauses might prevent you from working for a competitor company, or from doing business with the clients that you have worked with at your original employer. The restrictions often last for 6 or 12 months, so they can have a huge impact on your ability to find a new job within the same industry.
“Surely that’s not enforceable?” our clients often ask us, hopefully. It’s true that, in the past, these restrictions used to be very difficult to enforce. But over the past few years employers have become much better at drafting them and the courts have become much more willing to uphold them. All too often, we have to advise that the restrictions probably will be enforceable. And the real kick in the teeth is that an employer is not under any obligation to release you from restrictions if it makes you redundant.
So it’s important to get legal advice before you leave an employer, not afterwards. You’ll know what you can and cannot do in advance, before you inadvertently breach your contract and get a nasty letter from your employer threatening to sue you. This sort of litigation is extremely time-consuming and expensive. Even if your old employer doesn’t have the stomach or the pockets to sue you, a quick letter to your new employer putting them on notice about your restrictions might cost you your job.
If you take legal advice before leaving your employer, you might be able to negotiate a compromise. For example, your employer may be willing to waive a strict non-compete clause, provided you agree not to poach clients. Or they may agree to limit the restriction to certain named competitors, rather than keeping you out of the industry entirely.
If you are very senior, it’s even more important to take advice at an early stage. As well as non-compete clauses, you may well have unwritten “fiduciary” duties. These require you to put your employer’s interests ahead of your own and are therefore very restrictive. If you are contemplating leaving your employer, it’s worth getting legal advice before you take any other steps. It’s possible to breach your fiduciary duties by just making preparations to leave. We can help you understand what you can and cannot do when you are thinking about moving on.
And remember when you do move on, to look out for similar clauses in your new employment contract. It’s better to be aware of them from the outset. While everything is rosy at the start of the relationship, it may be possible to negotiate something which allows you a bit more room for manoeuvre. Think of it like a pre-nup; you and your employer are deciding in advance what’s fair, if and when you decide to go your separate ways. Sometimes it can be difficult to raise the issue - you certainly don’t want to sound like you have intentions of going to work for a competitor. We encourage our clients to hide behind us when negotiating; it's much easier to say that it's your solicitor who thinks the clauses are too restrictive, rather than you.
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