validity of non-compete clauses in an emplyment contract

Fu Manchu

I'm curious as to the validity of non-compete clauses in an employment contract. Can such clauses be enforced regardless of the circumstance. For instance, if a company is on the verge of going under (or appears to be) is an employee entitled to disregard such a clause or can the employer enforce the non compete clause?

Any advice or guidance is much appreciated.

3DataModem

Non compete clauses are largely unenforceable in Ireland.

Nijmegen

3D is - largely - correct. It depends where you sit in your organisation, and the perceived value to the company in chasing such a clause.

It costs money to chase this in courts, so if they think you'll be worth €1m in lost business to your new employer, they'll chase you. If not, why bother hiring in the lawyers in a case you may or may not win?

There's little case law, is the trouble.

RATM

3DataModem wrote: »

Non compete clauses are largely unenforceable in Ireland.

I'd tend to disagree. I currently know of 2 ongoing cases and from what I hear the employer has the employees in a corner. A contract is a contract and both parties knew what they were getting into at the beginning when they signed up to it.

In the legal game they are often defined by distance, i.e. a trainee solicitor cannot set up his own practice within X miles of his bosses practice. Also they are defined by time, 6 months has been enfored in case law in the past.

Finally it is true to say that it all depends on the monetary value of the business you are taking as to whether or not an employer will pursue. Nonetheless the avenues are there for them to do so via a civil case and if you lose it (highly likely due to you breaking a written contract) then you'll also likely be liable for costs which can run into thousands.

One defence given by an employee recently was his constitutional right to earn a living- it was thrown out as the judge said he still had that right- just not in the industry he wanted because he signed it away in a non-compete agreement. Going by that I'd say non-compete agreements are very much enforceable if the employer so chooses.

Just my 2c.

Fu Manchu

Thanks for the advice guys. These are the split opinions that i have been hearing on this and RATM's advice is the more worrying of the two.

So are there any ways to get around this. Can someone just hand in their notice and not say what there plans are. The position is not one where i will be taking any business with me or anything like that but there is potential to join a competitor.

Jim2007

3DataModem wrote: »

Non compete clauses are largely unenforceable in Ireland.

I disagree, as long as the clause is reasonable, then I'd say you'll find it hard to get a judge to agree with you.

For instance, preventing an accountant setting up a practice in the city of Galway for a 6 months period after he leaves public practice would be reasonable, but preventing the accountant from working, in any capacity, in the county of Galway for 6 months might not be, if he resided in the county as there would be grounds for arguing that it prevented him from earning an economic living.

Jim.

Jim2007

Fu Manchu wrote: »

For instance, if a company is on the verge of going under (or appears to be) is an employee entitled to disregard such a clause or can the employer enforce the non compete clause?

The fact that the employer appears to be going out of business is irrelevant. The liquidator will be able to enforce the contract in the name of the company during the liquidation, especially if he sees the opportunity to get some cash out of the exercise. His job is to raise as much cash as possible for the creditors and he would be breaching his duty of care, if he failed to do so. So he might in fact be more willing to do so than the original owner would be!

Imagine if there was a reasonable chance that he could extract say 15K from you or your future employer, he'd have a hard time explaining to creditors why he did not bother to do so and in fact he might even be take to court the the breach by the creditors.

Jim.

Fu Manchu

Jim2007 wrote: »

The fact that the employer appears to be going out of business is irrelevant. The liquidator will be able to enforce the contract in the name of the company during the liquidation, especially if he sees the opportunity to get some cash out of the exercise. His job is to raise as much cash as possible for the creditors and he would be breaching his duty of care, if he failed to do so. So he might in fact be more willing to do so than the original owner would be!

Imagine if there was a reasonable chance that he could extract say 15K from you or your future employer, he'd have a hard time explaining to creditors why he did not bother to do so and in fact he might even be take to court the the breach by the creditors.

Jim.

And where do the employees rights to earn a living exist in such circumstances. If the business is going under (or appears to be) surely the employee has a right to seek protect their income and seek employment elsewhere. It's not as if he is leaving of his own free will.

Time is not necessarily on my side to wait for the right role to come around which does not directly infringe upon such a non-compete clause.

Delancey

I recall my Father hiring employees who were subject to such clauses from their previous employers - he sought Counsels opinion which was that in the particular circumstances they were not worth the paper they were written on.
OP - if the question you have refers to your situation you really would be well-advised to take legal advice and not rely on a forum for guidance.

Jim2007

Fu Manchu wrote: »

Time is not necessarily on my side to wait for the right role to come around which does not directly infringe upon such a non-compete clause.

Then you'd need to take legal advice on the issue...

Jim

RATM

Given that the company is going under then you might just be alright. When you think it through logically your companies business/clients are going to be swallowed up by their competitors, one of whom you are thinking of joining. Because they are going out of business you could argue that it makes no odds where you go as all of their competitors have an equal chance of gaining some of the defunct companies business.

If an employer was staying in business after you left then they would typically have a strong case, especially if you took clients/business with you. Six months non-compete is considered reasonable- a year can and has been challenged.

However they're out of business so it would take a hard nosed liquadator to pursue such a case anyway. His risk level (given the circumstances and your impending redundancy) would be too high to consider it- if he looses then legal costs would have to come off the sale of assets and the creditors who are already lined up would be none too pleased about legal fees being paid out of their (undoubtedly) diminished slice of the pie unnecessarily.

In any case this is just my 2c, you need legal advice to be sure of your position before making a move, and fast. www.flac.ie are free and might help but I'd instead go to a solicitor who is well versed in Employment Law.