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Have a non-solicitation clause in my contract for customers

I have had direct dealing...
Have a non-solicitation clause in my contract for customers I have had direct dealing with in prior 12 months for three months after I leave.
My original signed contract was for a graduate management trainee in a different location. Never had a new contract when I had promotion to current role in a different area.
Is this contract valid?
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Answered in 2 minutes by:
9/9/2013
Ben Jones
Ben Jones, UK Lawyer
Category: UK Employment Law
Satisfied Customers: 48,499
Experience: Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
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Ben Jones :

Hello, my name is XXXXX XXXXX it is my pleasure to assist you with your question today. How different is the new role to the original one?

Customer: Before I was commercial assistant buying grain from customers in Nottingham area. New role was providing agronomy services and grain buying to farmers in Lncolnshire.
Ben Jones :

Ideally the contract the employer will try to rely on should reflect the job you are actually doing. Nevertheless it is possible for an old contract to still apply even if your job has changed, as long as it can be shown that this is a standard contract for the employer which is likely to have applied in any job you would have had with them, in which event the only things that would have changed would have been the specific terms governing the job, such as title, pay, and duties.


 


Saying that, such clauses will not necessarily be enforceable anyway. It is common for employers to want to protect their business interests from unfair competition by current and ex-employees. This applies especially to employees who have knowledge of sensitive and valuable information, have considerable influence over the workforce or have strong customer connections. However, at the same time it is in the public interest to ensure that employees are free to move between employers and use their skills, knowledge and experience in a new setting.


 


Whilst employers try and impose certain restrictions on their employees, under the doctrine of restraint of trade, any contractual term which seeks to restrict an individual's freedom to work for others or carry out his trade or business is illegal and unenforceable. The exception is when the employer can show it has a legitimate business interest that requires protection.


 


Legitimate business interests (LBIs) are commonly accepted to include:



  • Trade secrets and confidential information

  • Trade or customer connections

  • Stability of the workforce


 


An employer cannot impose a restrictive covenant merely to stop someone competing, but it can seek to stop that person using or damaging something which legitimately belongs to it, such as an LBI.


 


The most common restrictions are:


 



  1. Non-solicitation covenants - preventing an employee from contacting the customers of their ex-employer. Recent case law has suggested that solicitation means “directly or indirectly requesting, persuading or encouraging clients of the former employer to transfer their business to their new employer". This should be restricted to customers with whom the employee had contact during a specified period before leaving. Other relevant factors may include the employee's level of seniority in the business, the extent of their role in securing new business, the length of similar restrictions in the employment contracts of competitors. Generally, restrictions against potential customers will be harder to enforce. This is the potential issue you are facing here.

  2. Non-dealing covenants – this is a more general restriction and not only restricts solicitation but any other general contact with them, even if they are the ones that have approached the employee in the first place. The enforceability of a non-dealing covenant will depend on the interest being protected. Similar considerations as for the enforcement of non-solicitation covenants will generally apply, although the much wider scope of such covenants will make them harder to enforce.

  3. Non-competition covenants – these will generally be unenforceable, unless the employer can justify their use. As a matter of general law, once they leave employees are restricted from disclosing confidential information amounting to a trade secret. As with non-solicitation covenants, the restriction must be for a limited time. The geographical extent of the limitation must also be considered. Worldwide covenants have been held to be unenforceable, but more specific restrictions can be enforceable if considered reasonable in the circumstances.


 


There are a couple of options open to employers when trying to enforce restrictive covenants:



  • Obtain an interim injunction - this will result in a court issuing an injunction stopping the employee from doing certain things, such as dealing with specific clients

  • Seek compensation for damages that have resulted from the breach of the covenant(s)


 


In summary, the law on restrictive covenants is very subjective and depends largely on the individual circumstances of the business and the LBI that needs to be protected. There are no set rules and procedures, apart from the requirement for the restrictions to be reasonable and go no further than is required in the circumstances. Therefore, it is usually only down to the courts to establish whether a restriction is enforceable and, if so, whether an injunction should be granted or damages should be awarded.


 

Customer: If my customers say they want to follow me is this okay? Not persuaded them or courted them.
Ben Jones :

this is covered by the non-dealing clause so it depends if such a clause exists

Customer: "Knowingly service or deal with any customer or client of the company who was such a customer or client at any time during the period of 12 months ending on the date of such termination and with whom you had direct dealing"
Customer: Above clause says 3 months from termination of this contract , is that from when I handed my notice in or from end of my notice period?
Ben Jones :

well the inclusion of the word 'deal' could suggest they intended this to be a non-dealing clause so they could try and rely on that. However the issue remains the same - no one apart from a judge in court can decide whether these clauses were reasonable and enforceable. The employer can try and implement them, you can try and resist them - it is rare that both parties would agree on their enforceability, so in that event it would be for the employer to pursue this further if they wanted to and the only way is to take it to court, where a formal decision would be taken. Until they do that, and there is no guarantee they would, you are not prevented from dealing with these customers. Also the restriction would be from the time your employment actually terminates, so the end of your notice period

Ben Jones :

Please let me know if this has answered your query or if you need me to clarify anything else for you in relation to this?

Customer: Fine thanks
Ben Jones :

You are most welcome. Please take a second to leave a positive rating for the advice I have provided as that is an important part of our process. Thank you and all the best

Ben Jones
Ben Jones, UK Lawyer
Category: UK Employment Law
Satisfied Customers: 48,499
Experience: Qualified Employment Solicitor - Please start your question with 'For Ben Jones'
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