Contract Law: Restrictive Covenant

Mini

Hi all,

Firstly, I am not looking for anyone to give me the answer to these questions and I will happily go off and research I am just looking for guidance and a point in the right direction.

I have finally been given my employment contract almost 3 months in to working with my new company. Unfortunately there is a restrictive covenant in there.

I am fine (somewhat) with the restrictive covenant - however I see myself as only an admin person and not the main decision maker within the company and no real dealing with the direction of the business. I am confused slightly by this, but with no other jobs out there for me at the moment I may be required to sign it in order to keep my job.

What I am trying to find out rather unsuccessfully, is if I can be paid during the time that this covenant is enforced? And also would this be seen as gardening leave. Is gardening leave and a restrictive covenant different - if so how?

I would appreciate if someone could point me towards any publication or relevant case law which would help me to understand this. I have tried Bailli but have not found anything that could provide definitive assistance.

I appreciate your help with this assistance on this.

NoQuarter

Mini wrote: »

Hi all,

Firstly, I am not looking for anyone to give me the answer to these questions and I will happily go off and research I am just looking for guidance and a point in the right direction.

I have finally been given my employment contract almost 3 months in to working with my new company. Unfortunately there is a restrictive covenant in there.

I am fine (somewhat) with the restrictive covenant - however I see myself as only an admin person and not the main decision maker within the company and no real dealing with the direction of the business. I am confused slightly by this, but with no other jobs out there for me at the moment I may be required to sign it in order to keep my job.

What I am trying to find out rather unsuccessfully, is if I can be paid during the time that this covenant is enforced? And also would this be seen as gardening leave. Is gardening leave and a restrictive covenant different - if so how?

I would appreciate if someone could point me towards any publication or relevant case law which would help me to understand this. I have tried Bailli but have not found anything that could provide definitive assistance.

I appreciate your help with this assistance on this.

A restrictive covenant is a broad term, in what way is it restrictive? What is the covenant trying to restrict?

Mini

Hi

Thanks for your reply.

It's trying to restrict me working for a competitor for 6 months after employment ends. As I said above I'm an admin person so not sure why it is needed. My main fear is that I will find it harder to get a job with covenant in place. We are a small company so I also understand the need.

I was already unemployed for quite some time before getting this job so I am reluctant to sign contract with this in it. But I understand I will need to negotiate the clause in order to define geographical location but I wonder can I ask to be paid during the covenant timeframe.

Trying to source some concrete info to help my negotiations.

NoQuarter

Mini wrote: »

Hi

Thanks for your reply.

It's trying to restrict me working for a competitor for 6 months after employment ends. As I said above I'm an admin person so not sure why it is needed. My main fear is that I will find it harder to get a job with covenant in place. We are a small company so I also understand the need.

I was already unemployed for quite some time before getting this job so I am reluctant to sign contract with this in it. But I understand I will need to negotiate the clause in order to define geographical location but I wonder can I ask to be paid during the covenant timeframe.

Trying to source some concrete info to help my negotiations.

What you're describing is called a "restraint of trade" clause. They are valid but they need to be reasonable so it depends on lots of factors such as what your job is, what area its involved in, whether the trade is global or not. The classic examples are a global arms dealer and a wall street stockbroker. While its fine to limit an arms dealer to a mile radius, do that to a stockbroker on Wall st. and they wont be able to work anywhere.

As to your original question, gardening leave is different in that its what can be given during your notice period and not after your employment has ceased as in a restraint of trade clause. Gardening leave is to protect the company from someone who has decided to leave but is still in their notice period. So sometimes they send them home and pay them, because the information is more important than the 4 weeks wages or whatever it is.

ps - under statute you have to get your contract within 2 months of your employment.

Fred Swanson

This post has been deleted.

234

Yes they have. They can be valid but it is very facts sensitive. It depends on the nature of the job, the level of the position, the ability of the employee to take clients/work with them, the geographical and temporal limits on the clause.

The only way to know for sure is to litigate it.

Mini

NoQuarter wrote: »

do that to a stockbroker on Wall st. and they wont be able to work anywhere.

.

This is my main fear after being unemployed with this clause I essentially become unemployable for 6 months.

I'm not in any league of a stockbroker in fact my job would be lower skilled - glorified secretary. I'm in a skilled sector which I want to remain in.

Is there a penalty to not signing due to this clause? Can't find any resources online to confirm / assist with this issue.


Thanks you are being a great help.

Mini

234 wrote: »

Yes they have. They can be valid but it is very facts sensitive. It depends on the nature of the job, the level of the position, the ability of the employee to take clients/work with them, the geographical and temporal limits on the clause.

The only way to know for sure is to litigate it.

I wouldn't be qualified to start a similar business on my own. In my opinion going to a competitor wouldn't effect their business as they specialise in different areas of a sector.

Eg if it was a law firm we deal with family law whilst still staying in legal area their competitor would deal with contract law dipping occasionally into family but not a speciality of theirs.

Bepolite

Fred Swanson wrote: »

This post has been deleted.

Time and time again, in various different circumstances and for many, many years as any law student will tell you - you might tell it's not an area I found particularly stimulating

If you're asking whether the constitutionality has been testing, I believe so, but they are quite narrow as to not stop someone from earning a living.

Mini

Revisited my contract today - it's restricted to the full Republic of Ireland even though business in conducted solely in one county. Also has incorrect business description noted on it.

Time for negotiations I think.

Thanks everyone for your help.

NoQuarter

Mini wrote: »

Revisited my contract today - it's restricted to the full Republic of Ireland even though business in conducted solely in one county. Also has incorrect business description noted on it.

Time for negotiations I think.

Thanks everyone for your help.

You could always sign it anyways and then challenge it if it ever comes to it. I'd rather represent you than them if the clause is as you say it is.

Mini

NoQuarter wrote: »

You could always sign it anyways and then challenge it if it ever comes to it. I'd rather represent you than them if the clause is as you say it is.

Ignorance of the law or in this case contract details plain for me to see surely wouldn't be a great defense.

Maybe if I get the area reduced from the whole country but say nothing on the job description. Say I interpreted it differently if it ever becomes issue. Even though it is widely wrong.

Have meeting with boss tomorrow on it so will see by then.

Thanks for your help.

NoQuarter

Mini wrote: »

Ignorance of the law or in this case contract details plain for me to see surely wouldn't be a great defense.
.

But the point is, if they ever did bother challenging you in Court, you would have a good chance of winning on the face of it and wouldnt be liable for any costs so could afford (and would be wise) to get Counsel.

If they didnt bring you to Court and just told you you cant work anywhere else because of what you signed, id laugh in their face and say its a null and void provision for being too onerous.

It wouldnt be worth their time bringing you to Court unless you had some very valuable knowledge and even then they would surely get legal advice first and the legal advice would be that they are on the back foot.

armstrongracer

I once worked as a contractor for a Galway based medical device company. They basically tried to re-negotiate our contracts adding a clause to stop us working for any other medical device company for a period of three years. If you're an engineer based in Galway there's precious little else other than medical device work. One of the lads took it to a solicitor who said that it was a 'Restriction of Trade' and technically illegal under European law. We all refused to sign and they dropped it. Taking IP and or customer info to a competitor is a different matter altogether, they can and will hammer you for that. I think they are trying it on, accountants and lawyers move between the big four on a weekly basis without issue. When I was in the automotive industry I've been poached by competitors numerous times, the only thing they did was escort me off the premises and check my bag for documents and USB sticks. Which is standard behaviour in most multinationals.