My contract of employment states that I cannot work for a competitor for 12 months after my employment terminates.
A clause that seeks to restrict the activity of an employee after the termination of their employment is called a post termination restriction. Some times this may be referred to as a non-compete clause.
In order to be enforceable against you, a post termination restriction must protect a legitimate business interest and its effect must be reasonable in protecting that interest.
What is considered reasonable will depend on the individual circumstances of each case. For example, a clause seeking to restrict a veterinary surgeon from poaching customers for a period of 12 months may be reasonable, given that most pet owners only take their pets to the vet once a year for an annual checkup.
This could be compared with a clause seeking to restrict a hairdresser from poaching customers for a period of 12 months. This is likely to be unreasonable given that most people visit the hairdressers every few months. As such, a restriction of six months maybe more appropriate as this period would allow the hairdressing business time to protect their business interest by transferring the customer to a different hairdresser in the hope of retaining their business.
What is the impact of breaching a non-compete clause?
The financial implications of being in breach of an enforceable restrictive covenant are significant.
- injunctive proceedings can be issued against you
- the court could make an order requiring you to pay damages equal to any financial loss suffered by your previous employer as a result of your breach of contract
- you could also be liable for the costs of the previous employer.
It is therefore vital that you take legal advice on the effect of any post termination restrictions in your contract of employment if you are concerned.
If you have any queries about this or any other aspect of employment law please do not hesitate to contact me on 01789 336 957 or amanda@pillingerandassociates.co.uk