Employment contract - restricted clause

[Secretsout]

I'm about to go and work for a new employer. Very small, niche, but lucrative business who, in the past, have not issued contracts to employees. I will be a key member of the team. They have been stung by people leaving and setting up on their doorstep.

I've been told my contract will contain a clause stating that if I leave I cannot work in this industry within 25 miles of the current base for 2 years.

My question is....is this enforceable?

I don't think it is as I believe it's restrictive practice and inhibits my ability to work and earn. Thoughts?

I think it is enforceable, I have come across similar in the past.

So I leave to work 23 miles away and they take me to court. what is the alternative? I claim social security because I cannot work? Would a court say, ok, secret, go on the dole?

Restrictive covenants are legal and enforceable provided they are reasonable. If they'd said you can't work in the industry nationally, that would be unreasonable. But a 25 mile radius for 2 years does not, on the face of it, sound unreasonable.

It depends what is reasonable given the area and the business. This is quite a complex area of law. Two years might be considered too long. The area might be considered too large. For senior lawyers it's not unusual to have a restriction stopping you from working for another law firm for up to a year. You could try to negotiate it down.

Good points above. There is a massive myth out there that all these clauses are always invalid. That is wrong. The courts uphold them all the time if they are reasonable.

I think 2 years is rather on the long side though and more like 6 months to a year is much more likely to be reasonable.

If they have not issued contracts to employees that breaches the law unless they have issused some kind of letter of employment/particulars. I wonder why it's taken until now to realise that.

In practice if you will damage them a lot when you leave they might use the clause. If you would not do much damage they might not choose to go after you.

“Employees” in effect have a contract by going to work and the company paying them for their services. Remarkably stupid not to write it down though.

If it’s small and lucrative, they are worried about you nicking their clients. Of course they want to protect their client list from ex employees. Many companies have clauses like this. If you had worked your socks off to establish a company that was doing well, would you want ex employees setting up locally and taking your clients? Probably not.

I had a clause like that at a small niche shop. Idea being we couldn't be poached easily, as they had had major issues with employees being offered huge pay increases to spill how the business ran by less successful direct competitors.

There were three geographic zones, from memory. 5km for 2yrs, 12.5km for 1yr, 25km for 6mo. Any further was considered ok, but your name would have been mud if you did blab the company secrets. Small industry and all.

Maybe you could negotiate some bands into your contract, to find a compromise?

Clauses like this are very common, and yes it is enforceable. Contracts can work both ways, you can strike through the clause, annotate the document with your name, date and signature adjacent to the strike through, take a copy, then submit the original back to the employer, and see if they still want you. Or you can employ a solicitor who specialises in employment law to negotiate and provide you with an potential exit package that works for you. Not signing the contract, would also mean it’s enforceable as you took the position knowing what the company policy and its terms and conditions were.

"inhibits my ability to work and earn."

And without them it can inhibit employers to trust their employees and make strategic plans for the medium to long term. You want to know things as a key member of the team but cannot see how this is a two way process. You are going to be trusted. There has to be a mechanism to address what happens if that trust is breached.

As others have said its a lot to do about proportionality. If you are so concern about this, seek legal advice. 25 miles seems a very short distance to be worried about - where you planning something?

I suspect 2 years would be unenforceable and it woukd therefore make the whole clause unenforceable because the tribunal woukd not cross out just part of the clause.

Both my husband and I have successfully challenged clauses as lawyers but entered the employment knowing they would kot be enforceable because if we had suggested they were uneforceable beforehand we have bee stuck with one that was enforceable.

Yes 2 years is very likely to be invalid long. EU law allows up to about 3 years non competition restricton if you sell your business with knowhow and goodwill - but that is a whole business sale. Even very senior people in the UK who might be restricted for 12 months are rarely asked for 2 years. In fact there is an argument although I donm't agree with it that you try to get the longer you can as it more likel to be invalid! However that's a risky strategy.

As it is a new empl,oyer perhaps just suggest 6 months to them (and if you are not senior at all and could not do them much damage when you leave probably no restriction is really needed as they will have confidentiality clauses and if relevant intellectual property protection of documents etc)

If the 2 years goes then almost certainly the 25 miles bit goes too unless they have set it out in very separate clauses.