My employment position has been disestablished as of Monday…

Question

My employment position has been disestablished as of Monday December 10th, and I
have accepted redundancy with 4 weeks notice already paid out. My employment
agreement has both a non-solicitation clause and a restraint of trade clause
which I believe are both unenforceable in terms of their wording and their
unreasonable impact on my ability to earn a living. I would like a formal legal
opinion on this matter.
"Non Solicitation
The Employee shall not at any time during the period of employment or for a
period of six months after termination of employment, for whatever reason,
either on the Employee's own account or for any other person, firm, organisation
or company, solicit, endeavour to entice away from or discourage from being
employed by the Employer, any other employee or actual client/customer or
prospective client/customer of the Employer."
"Restraint of Trade
Employees shall not at any time during the term of this agreement and for a
period of three months after the termination of employment with the Employer
establish, purchase, or obtain an interest in, either directly or indirectly any
business in relation in any way to the Employer within a radius of 100
kilometres, without the express consent of the Employer, provided that such
consent shall not be unreasonably withheld."
Please advise.
Thanks Paul

Chris The Lawyer · Accepted Answer

christhelawyer : HiWelcome to JustAnswer. My first response will follow shortly.
Please feel free to follow up if anything is not clear
christhelawyer : I can reply with some confidence that the restraint of trade
clause will not be effective to stop you going into another job. It would be
possible to stop you working for yourself however. The reason for this is that
the courts regard it as against public policy to restrain persons from obtaining
employment, even in competition.
christhelawyer : Setting in your own business is different however, and in that
case you would need to look at whether the clause was reasonable in the effect
on you.
christhelawyer : 3 months is not a long time and is likely to be reasonable but
the 100 km radius may be too much. It can depend on the nature of the job
however.
christhelawyer : The non solicitation clause is more difficult. If customers
come and find you, the former employer cannot do much, but if you were to
initiate contact and ask for their business this would be contrary to the
contract and could lead to you being sued.
christhelawyer : Of course you could ask for consent first and see if they would
do so, in the context of you being made redundant. This would help in a
situation where they were difficult, because having made you redundant, they
would look foolish if they tried to stop you working, and their complaint would
be seen as unreasonable.
Customer:

Hi Chris, thanks for this feedback. Firstly I have no intention of taking a job
with a direct competitor anyway, and the two opportunities I am currently
investigating would not conflict in any way with the business of my former
employer.

Customer:

I want to know whether they can stop me emailing my LinkedIn network about my
changed situation, given that many of their customers are LinkedIn connections
for me. Also, there are several clients I want to phone to wish Merry Christmas
and say I enjoyed working with them. Is that likely to cause me problems do you
think?

christhelawyer : As long as this is social they cannot stop you. Posting on
Linked In is fine, as this is not a direct contact. It is an interesting point,
but if you think of this as a form of public notice, it is fine in my view. The
important thing to avoid is soliciting their customers to use you in the new
job, and as long as you do not do this you are clear.
christhelawyer : Similarly, phoning them for seasons greetings is fine, but
avoid any suggestion they need to use you in the new job, keep it just social.
Customer:

Sorry, I hit return at the end of a para and this system posts my unfinished
comments. Very annoying. When you mention asking for consent in the last para
above, i take it you refer to the existing Restraint of Trade wording, and that
I ask them for consent to be released from the R of T. Please confirm.

Customer:

re LinkedIn, my intentions is to download the list of contacts and send them
each an email. I will not be touting for business, since I have no new job yet
anyway. Also, the non-solicitation refers to "client/customer" and "prospective
client/customer". Anybody could be a prospective client/customer; how reasonable
is that restriction?

christhelawyer : If you are not working for a competitor you don't need consent.
And since you are just moving from one employer to another the restraint is
unenforceable, as I discuss above. By all means tell them where you are going
but you do not need consent or permission.
Customer:

What about the "prospective client/customer" re no solicitation? I guess if I'm
not soliciting, it doesn't matter what their status is?

christhelawyer : For the LinkedIn contacts why not just announce you are going
and leave it at that. When you get the new job also announce that on the profile
or your news. And yes to the soliciting issue, if you are not asking them to
send you work that should not be a problem.
Customer:

I've already changed my LinkedIn status to that effect. However every month i
send an email with a "quote of the month" to my contact database including
clients just to stay in touch. So they are used to hearing from me on a one to
one basis, and I want them to have my new cellphone number, or is giving them
that tantamount to "solicitation"?

christhelawyer : That is coming close to crossing the line. There would be no
need to email your contacts except for purely social reasons, and this may be
unwise. And it goes without saying you should not do this on a work computer.
Customer:

I have no work computer now anyway. Still, can you comment on the "prospective
client/customer" as mentioned above. I can easily exclude anyone who is a
current client of the company.

christhelawyer : What sort of business is this and what was your role?
Customer:

I was an account manager for a mailhouse and marketing services company. Their
official definition of a current customer for bonus/commission calculations is a
business that has spent with them in the last 12 months. I can exclude them, and
also any prospects who have pending jobs, who I have already briefed the MD
about.

Customer:

That's one company not two by the way.

christhelawyer : I suggest you be very cautious. I emphasise that any social
contact will be ok, but your former employer could correctly critiicise a mail
out to all your contacts, even excluding current customers.
Customer:

Sorry, "correctly criticise"? What does that mean? Meaning he would disapprove?
But what could he do actually about it? And what if it was to only some of my
contacts? And I would still like your comment re "prospective client/customer"
which seems to me a "catch-all" phrase that is totally unreasonable.

Customer:

Hi Chris, I am still waiting for your answer to my last questions before I close
this off. Please respond.

christhelawyer :

Sorry there was a software glitch which meant I could not reach this earlier.

christhelawyer :

When I say correctly criticise, I mean enforce the clause in court. The law
prevents you from accessing existing clients. You can approach new clients but
only if this are really new and not through contacts with former clients at your
old job.

Customer:

Thanks, ***** ***** am still confused and wanting clarification of this further
as follows: refer to the no-solicitation clause quotes, in articular " . . .
solicit, endeavour to entice away from or discourage from being employed by the
Employer, any other employee or actual client/customer or prospective
client/customer of the Employer."

Customer:

Damn the return key - does the word "solicit" and the rest of this clause as
quoted above relate to approaching people, as defined, in relation to "entice"
-ing them away from my former employer, or for any reason whatsoever? And how
would one define a "prospective client/customer"? Is that anyone anywhere who
might possibly use the company's services, which seems ridiculous and surely
unreasonable?

christhelawyer : Can I suggest you read this recent case which will explain how
this works in practice.
http://www.nzlii.org/cgi-bin/sinodisp/nz/cases/NZEmpC/2011/63.html?query=Hally%20labels
christhelawyer : In this case the facts are a bit similar to yours, and the
Employment Court discussed the law in some detail. In that case an injunction
was ordered
Customer:

Hi Chris

I have read the case you sent to me and it does not help me at all, except that
I note that
the restrictions in this case very specifically refer to "competitors of the
Company" whereas
in my case the contract does not make this distinction.

I repeat below the clause I am concerned about, with my added emphasis by way of
underlines:

"Non Solicitation - The Employee shall not at any time during the period of
employment or for
a period of six months after termination of employment, for whatever reason,
either on the
Employee's own account or for any other person, firm, organisation or company,
solicit,
endeavour to entice away from or discourage from being employed by the Employer,
any other
employee or actual client/customer or prospective client/customer of the
Employer."

I am trying to establish whether it is reasonable to consider that "any other
person, firm,
organisation or company" implies "competitors of the Company"? Otherwise my
argument is that
the restriction is completely unreasonable, because it applies to "any company
at all".

The other key phrase is " ...endeavour to entice away from...".

It seems to me that the intent of this clause is to restrict me from encouraging
or persuading
any client, or employee, or prospective client of the Employer to take their
business (or, if
employees, their services) elsewhere (i.e. to a competitor). If this is the
correct
interpretation I have no problem with it because I have no intention of doing
any of those
things.

In which case I don't see why I could not communicate with the contact list I
have built which
includes clients and prospects of the company provided I am only communicating
at a personal level, or even discussing the benefits of products or services not
available from my former employer. For example, if I approach client A to sell
them product B, being not a product offered by my former employer, how could
this be held to be detrimental to the Company, and therefore restricted.

Would you agree with this?.

The other thing I am trying to establish, is whether the word "solicit" in the
context of this
clause also implies "communicating with a client/prospect in order to persuade
them to take
their business to a competitor" because I have no intention of attempting this.
But, if it
could be held to mean "communicating with a client/prospect of the Company about
anything at
all" then again such an embargo seems completely unreasonable. Please provide
your opinion re
this.

christhelawyer : The clause is indeed very wide. Perhaps the risk is not so much
stopping you, but the cost of litigation even if you are right, and they try to
stop you anyway. The issue is about interference with the ties between your
former employer and the clients and prospective clients. If you are seen to have
taken advantage of this relationship they may decide to sue. They would regard
the information about the clients as be.ongong to them, and your use of it is a
breach of confidence.
christhelawyer : What they could stop is soliciting the client and bringing then
to a new employer or your own business. They could not stop you contacting them
to just tell the customer that you have left. But even telling them where you
are now working could be regarded as soliciting.
Customer:

Ok thanks.

My employment position has been disestablished as of Monday…

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