1. Do get legal advice if you can. There’s no substitute for getting some formal legal advice from the outset. Actions based around restrictive covenants can be costly (in terms of time and money). It’s likely to be far more cost effective for you to get some advice at the start- and to do things correctly – rather than feeling ‘forced’ to have to involve lawyers later (when it’s usually harder to unpick things). Your new employer may have lawyers that they’d be happy for you to use (and some may even offer to pick up the bill for that).
2. Do read your contract. If you choose not to involve a lawyer from the outset, then at the very least, you need to read your contract with a fine toothcomb. (And do make sure it’s the correct contract!). Don’t just scan through the headings. Sometimes covenants will be in non-obvious places (non-solicit, non-compete, non-dealing, non-poaching, confidential information, disclosure, your obligations). Probably THE most important section to read, and to ensure that you understand, are the “definitions” which are usually near the beginning or end of the contract or clause (‘interpretation’, ‘definitions’, ‘terms used’). You need to ensure you understand how the definitions and the actual clauses work together. If a word has a capital letter, it’s probably defined somewhere: find where and read this, together with the clause. Even if it doesn’t have a capital letter, ensure you understand exactly what’s meant by words such as ‘customer’, ‘client’, ‘contact’ etc. in the clauses that bind you.
3. Do give some thought to how to deal with issues. Some contracts include terms around informing your employer if you are approached for/considering working with someone else. If you’ve already inadvertently breached this, be aware that you have (it’s going to be pretty obvious if you’ve resigned without mentioning it!). Think about how you’re going to deal with that point if confronted.
4. Do keep your new employer informed. Let them see your old contract (you can make a copy and black out personal details that you may not want them to see, such as salaries etc. on the copy, if that’s a concern). They (your new employers) could be subject to tortious claims for inducing a breach of contract if they make you do things in breach of your old contract, so it’s in both your interests to ensure that that doesn’t happen. They should be able and willing to work with you to ensure that you don’t breach your covenants. Whatever you do, don’t lie and/or ignore things and hope that it won’t matter and that no one will notice. Employers are used to dealing with things like this. They’ve likely got covenants in their contracts. They know how it works. If you receive a legal or other letter from your former employer which makes allegations, keep your new employer in the picture (chances are, they may have received one too!).
5. Do bear in mind that your employment contract’s wording may not be the full picture. Depending how high up the food chain you are/ what responsibilities you had, you may be subject to other obligations (e.g. fiduciary duties for directors), duty of good faith etc. Also, it may be relevant if your employer has breached your contract as this may weaken the effectiveness of the post termination restrictions.
6. Do think about electronic communications. Remember that if you have a work mobile/blackberry, lap-top etc. your employer will be able to require its return when you move on, and could then review materials on it (it’s not gone just because it’s deleted). They may also be able to monitor emails etc. sent whilst you worked there (or require disclosure of such materials during litigation).
7. Don’t breach your covenants. Yes, that was a DON’T. Even if you think they are too wide/unfair/unenforceable, don’t breach them. If you do, be aware that you & your new employer may find yourself on the receiving end of legal letters and potentially litigation. If there are particular clients or work that are likely to follow you to your new employer then ensure you take advice before this happens.
8. Don’t engage in behaviour that could lead to suspicions that you’ve breached your covenants. Yes, Jim might be a great friend now and a fellow school-dad, but if he was/is also your ex-employee’s largest client, wouldn’t it be better to delay that friendly public golf game with him until the expiry date on your restrictive covenant has been and long gone?
9. Don’t hope that there’s an easy answer. Litigation around restrictive covenants is often so costly because things are rarely black and white (and there’s often a lot of money riding on whether a covenant is or isn’t enforceable). The factual circumstances and the wording of the contract, amongst other things, can make a real difference as to how a Court is likely to view things. But even in a ‘best case’ scenario, there’ll always be some litigation risk and some grey areas.
10. Do, see point 1 again. Which leads us neatly back to our suggestion that you should seek legal advice as soon as possible. Give us a call if you think we could help. There’s no obligation to commit at that stage: we’ll discuss things with you, and, if we think we could help, and you’re happy with our fees and other terms, you can become our newest client.
June 2016: This Bulletin contains general overview information only. It does not constitute, and should not be relied upon, as legal advice. You should consult a suitably qualified lawyer on any specific legal problem or matter.