2

The small UK family-run business that I've worked for during the past 18 years offers services in topics A, B, C and D. Other staff (and myself) can do all of the services A, B & C but only I can do service "D" which is my speciality. 3 customers use service "D".

There is a non-compete clause in my contract (which unfortunately I have lost) but it is likely to be a "template" (or boiler-plate) clause as this company would never have hired a solicitor to write their contract of employments for them.

I intend to hand in my notice to quit next month, and the customers who use service "D" will be left high and dry, with my current employer unable to get another specialist to replace me. (I know a lot of people feel they are irreplaceable but I really do have very specialist knowledge in this topic).

I'd like to continue service to those customers and carry on providing them with skillset "D" but I'm worried my current employer will come after me for non-compete, even though the company cannot provide "D" without me any more.

Could I defend my position by arguing that since my current employer won't be able to provide skillset "D", I'm only carrying on serving those clients because "there is no other option" for them, and I'll not be competing with my old employer because they won't be able to provide skillset "D" anyway?

Smithy42
  • 23
  • 3

3 Answers3

3

Could I defend my position by arguing that since my current employer won't be able to provide skillset "D", I'm only carrying on serving those clients because "there is no other option" for them, and I'll not be competing with my old employer because they won't be able to provide skillset "D" anyway?

This would not be a defense under any U.S. law (although in some states there might be defenses that are completely different in kind).

Part of the purpose of a non-compete is precisely to prevent you from doing what you propose to do - taking a part of the company's business with it due to relationships you've established with its customers while there. The fact that your departure impairs that ability of the the company to do that work in the future is irrelevant. Calling it a "non-compete" is something of a minsnomer. They aren't about ending competition per se, they are about preventing a departing employee from taking its business with them.

ohwilleke
  • 257,510
  • 16
  • 506
  • 896
3

While the enforcement of non-compete agreements varies a lot by location and situation, this is a text-book example where it IS enforceable. Taking existing clients without permission is very much a no-no in any type of non-compete agreement and typically the courts will frown on it too.

Could I defend my position by arguing that since my current employer won't be able to provide skillset "D"

No. That's not your problem to solve or yours to assess. Your employer owns the relationship and contract with the client, so it's up to them to decide how to handle this.

A key term here is "without permission". If your employer can't provide the service and still wants to keep the client happy, they can just bring you in as an independent contractor. Ex-employees become independent contractors all the time (and vice versa), that's a perfectly normal & common thing to happen.

What exact shape this may take depends on what all parties want and care about which can easily be negotiated.

Things get more tricky if your employers digs in their heels. If they can't fulfill their contract, the client is likely to walk away and a natural thing for them would be to reach out to you. Whether you can engage at this point or not will depend a lot on your specific contract (example: "solicit" vs "engage"). At this point it would probably best to have a local lawyer look your contract over and assess how it affects your situation and how it stacks up against local practices and recent court decisions.

Hilmar
  • 1,333
  • 8
  • 11
1

It's vital to know the wording of the clause in the contract.

Some contracts don't include post-termination 'restrictive covenants'.

Some restrictive covenants are not enforceable.

A restrictive covenant must be narrowly drafted so as to protect legitimate business interests and go no further than is reasonably necessary.

It must have a reasonable 'restriction period' and state the legitimate business interest it's intended to protect.

Otherwise it is 'void' - of no legal effect - because it's a restraint of trade and contrary to public policy.

A restrictive covenant that, for example, is intended to prevent someone from working in their chosen trade or profession forever is wholly unreasonable - automatically void.

A business may use employment contracts with restrictive covenants that are reasonable for some of its employees but unreasonable for others. For example, consider the differences between a sales or marketing director and a sales or marketing assistant, receptionist or shelf-stacker. It may be reasonable to have a non-competition clause for a sales director but it does not seem reasonable for a shelf-stacker.

There are different kinds of restrictive covenants. In the circumstances described in the question, there could be:

  • non-solicitation - the former employee may not contact the former employer's customers to do business with them
  • non-dealing - the former employee may not do business with the former employer's customers at all
  • confidentiality - the former employee may not share the former employer's confidential or business sensitive information with third parties
  • non-competition - the former employee may not work for a competitor or set up as a competitor

It may well be reasonable to have restrictions on contact or dealing with the former employer's customers for some months, particularly if new customers are very time-consuming and expensive to acquire.

As an aside, in May 2023 the UK government proposed a three month limit on non-competition clauses.

Then, if the clause seems enforceable, will the former employer enforce it? To do so, they must go to court to seek a court order against the former employee.

Alternatively, circumstances may arise such that the former employer can sue the new employer.

Prospective employers would be wise to ask if the candidate is subject to any such restrictions.

Lag
  • 20,104
  • 2
  • 46
  • 76