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I have a question regarding restrictive covenants in my contract.

I'm 24 years old and...
I have a question regarding restrictive covenants in my contract. I'm 24 years old and have just returned from Hong Kong where I worked in a Junior Marketing position for one year for a company whose core business is testing mobile phones to ensure they are ready for the market. I now work for the same company but in the UK.The last few months I established a partnership with an app company in China (different to our usual business) with the idea that we will help expand their apps to the UK and help them connect with UK app companies in order to launch UK apps in China. There has been no contracts signed between my company and the app company except a Non-Disclosure Agreement. I'm now thinking of leaving my current company, but I would like to continue working for the app company, perhaps on an independent contractor basis. My employment contract has restrict covenants which state I cannot work for a client for 12 months after the termination of my contract. Is this enforceable?
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Answered in 2 minutes by:
5/21/2013
Jenny McKenzie
Category: UK Employment Law
Satisfied Customers: 6,406
Experience: 10 Years of experience in Employment Law and HR
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Hello and welcome to Just Answer, is your employer likely to suffer a financial loss if you do this?
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Customer reply replied 4 years ago
Hi Jenny. Can you define financial loss? My employer has never had business with this field and therefore never made money with it, however if the app company decide to use me as an independent contractor and not my company, then there is the potential of my employer not making money
Hi the scenario you discuss where the app company would work with you and not your employer would result in a financial loss to your company to the value of the contract.

The reason that I ask that question is significant as restrictive covenants are only enforceable in so far as they protect a legitimate business interest. If you were to go and immediately replace your employer as a consultant then restrictive covenant seeking to prevent you to do this would most likely be enforceable as the employer is entitled to protect a legitimate business interest and is entitled to recover its losses.

If you are going to them to work in a capacity in which your current employer has no business interest then they would struggle to enforce a clause on the basis that they are not seeking to enforce a legitmate business interest and in any event you can only sue for damages resulting from a loss to the employer. If nothing is lost to the employer then there would be no point in suing you. This is particularly the case given it can cost tens of thousands of pounds to enforce such clauses in the court.

If you have any further questions please ask. If i have answered your question then I would be grateful if you would give my answer a positive rating.

Thank you and all the best.
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Customer reply replied 4 years ago
Thank you for your advice. I have the following questions:

1) does the fact that there are no contractual agreements between my company and the app company change anything?
2) does this mean that my employer can only sue as and when this arrangement makes money?
with regards XXXXX XXXXX are you saying that the app company is not a client or that it is and there is no contract?
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Customer reply replied 4 years ago
They are much more a partner rather than a client because the agreement is a revenue split on money made rather than a fee for our services. However everything so far has been spoken agreement, except for a Non-Disclosure Agreement which merely states neither company will discuss business related matters outside of the agreement.
Ok to answer your 2 questions.

1. The fact there is no contract does not change anything but you could argue the app company is not a client but a business partner and therefore the clause, as drafted, should not apply.
2. Technically the employer could take an injunction out to prevent you from doing this before it loses money. It would have to demonstrate that you were in breach of contract and that significant losses of business would occur before a court would grant an injunction.

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Customer reply replied 4 years ago
Thanks Jenny. One more question. Given the information you have here, and in the event that my employer did attempt to take an injunction out, in your professional opinion what is the chance it would be enforced?

To help you, these are the details in my contract:

8.1.1. The Employee agrees NOT to
8.1.1.1. form or be associated with any competing business whilst still employed
8.1.1.2. form or be associated with any related business whilst still employed
8.1.1.3. form of be associated with any competing business 12 month after the termination of this contract
8.1.1.4. participate in activities of any kind, paid or unpaid, from a competitor or client within 12 months after the termination of this contract
Hi It is not possible for me to say as I do not know about the activities of your employer and those of the app company and do not have any evidence that the parties might present to a hearing.

All that I can tell you are the general principals which I have given above. Unless there is a legitimate business interest and there is a real risk of financial loss the clause will not be enforced. If there is there is a risk to you.

These clauses are extremely common to put employees off. As a practical way forward I would suggest you speak to the app company and show them the clauses. They may agree to pay the cost of any payout in the event that there is a successful claim.

Jenny McKenzie
Category: UK Employment Law
Satisfied Customers: 6,406
Experience: 10 Years of experience in Employment Law and HR
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Category: UK Employment Law
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The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

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