Case Study: Advising on Post-Termination Restrictive Covenants
Summary
How Christianne Silverwood, based in Haywards Heath, helped an estate agent leave his employment to set up his own business, without breaching the post-termination restrictive covenants in his employment contract.
The Situation
Colin was employed by a local estate agency, East Sussex Abodes. Colin was unhappy with how he had been treated by his employer and wanted to set up his own firm.
He was aware that his employment contract with East Sussex Abodes contained a number of post-termination constraints so he contacted Martin Searle Solicitors for advice.
His employment contract contained significant restrictions in relation to poaching staff, customers and a non-compete clause.
This meant that Colin could not entice any staff or customers away from East Sussex Abodes for at least 6 months after leaving the company. They also prevented Colin from accepting a new job working for another estate agency business, within a 5 mile radius of East Sussex Abodes’ premises, for 2 years.
Colin wanted to know whether breaching his post-termination clauses would put him at risk of his former employer taking action against him in the High Court which might result in expensive legal claims against his new business.
What Martin Searle Solicitors did
We took detailed instructions from Colin about the work he carried out for East Sussex Abodes, and the type of estate agency he was hoping to establish. We then considered the terms of his employment contract with East Sussex Abodes to assess the risks.
We advised Colin on the enforcability of each restrictive covenant. We advised that any contractual term restricting an employee’s activities after termination is void for being in restraint of trade and contrary to public policy, unless the employer can show that:
- It has a legitimate proprietary interest that it is appropriate to protect; and
- The protection sought is reasonable with respect to the interests of both parties and the public interest
We explained that an employer cannot impose a covenant simply because they do not want an ex-employee to compete with them. However, they could seek to prevent the individual from using or damaging something that legitimately belongs to them.
We advised Colin that some of his post-termination restrictions were likely to be enforceable but only for a limited time and with a limited scope.
- For example, his non-solicitation clause only restricted Colin from poaching those East Sussex Abodes’ customers whom he had personal dealings in the 12 months prior to the end of his employment contract. This only applied for 6 months
- With regards to the non-poaching clause, we explained that this only applied to staff who held Senior-Negotiator positions, and did not apply to support staff
- The non-compete clause was narrow and could not stop Colin from operating as an independent estate agent in the same area as East Sussex Abodes
We advised he should ensure that his offices were situated at least 5 miles away from East Sussex Abodes’ premises. As long as Colin adhered to this, he could be involved in all aspects of estate agency within the same area as East Sussex Abodes.
The Result
Having been fully informed of how his restrictive covenants could impact on his future, Colin resigned from his former employment. He went on to set up an estate agency firm with a partner. When establishing his new firm, Colin was careful not to breach any of his post-termination restrictions and was able to operate without the fear or risk of having to defend a High Court injunction.
If you are concerned about your post-termination contractual terms, our expert employment law solicitors can help. Contact us today for an initial consultation on 01273 609911, or email info@ms-solicitors.co.uk.
