Made redundant - can I go and work for a competitor?

[SilverRainCloud]

Worked for current company for almost 6 years and been made redundant. The contract I signed 6 years ago states that I cannot work for a competitor for 12 months. Is that standard, reasonable and enforceable when I’ve just lost my job?

Reference request…

It depends on the wording. Sometimes the courts will remove some words from a clause if that makes the clause enforceable without adding to or modifying what remains.

This is the wording on the relevant two pages. Thank you again for replying with the benefit of your expertise. It’s such a stressful time and your kindness is really appreciated.

I worked with a HR company to draft contracts for a business I worked for.
We put this clause in place but we were told it’s not lenforceable but would act more as a deterrent.

Some parts of this may be enforceable depending on your role - the more senior you were, the more likely it is that some parts are enforceable. The clause provides for the courts to make it enforceable by reducing the length of time. It is impossible to say whether they would do so.

The outgoing government did announce plans to limit such clauses to 3 months but, sadly, haven't got round to enacting that.

Have you had enhanced redundancy (not payment in lieu of notice) in theory that could be withdrawn if you are in breach

Statutory redundancy (1.5 weeks pay for each year I’ve been there) plus the small amount of holiday and bonus that was due.

I can take a look at it if you want but in short:

• the fact that you have been made redundant is unlikely to impact enforceability
• the crucial question is whether the restriction goes any further than is necessary to protect the company’s legitimate business interests
• no one can give you a firm answer on this without seeing a copy of the clause and knowing more about your role and the shelf life of any confidential information that you hold

Just seen the photos of the contract above. We need to see the definitions too please

Thank you 🙏🏻
Here it is with the definitions.

Thanks. I assume we are looking at the restriction in 17.3(a). I think there are 3 grounds on which you could challenge the enforceability of this clause:
(1) I cannot see a provision stating that any period of garden leave will be offset against the duration of the post termination restriction. Unless there is no garden leave clause at all in the contract the courts would expect to see such a provision.
(2) It prevents you carrying out any role in a competitor even if you would not be at risk of using your former employer’s confidential information or customer connections in that new role, eg it would prevent you working as a receptionist or even a cleaner. Again, the courts usually expect a clause saying it only applies to same or similar roles.
(3) you may be able to challenge its length arguing that it’s longer than necessary but it’s impossible to say without knowing more about your role. What a court will not do is say 12 months is too much but we will enforce 6. It either stands or falls as drafted (in this respect).

Thank you so much. I think a competitor may have a role and I really need another job. Final question, if I took a role with a competitor and the company who have made me redundant did decide to challenge it, what happens if the court find in their favour? Trying to work out now whether I can risk it.

If they wanted to enforce the restriction they would need to apply to the court for an injunction. However this is a time consuming and costly process so 95 percent of the time a company won’t take this step. Usually they will send a snotty letter threatening legal action but then drop it if you don’t comply. However I can’t promise your former employer won’t fall into the 5 percent!

i would recommend that you apply for the job but tell them about the restriction. They may be willing to negotiate with your former employer eg agree that you can work for them but that you won’t work for the same customers for the first 12 months. This is how these issues are often resolved in practice.

So if an injunction was granted it would require you to comply with the restriction. Damages would only be awarded if the former employer suffers provable financial loss from your breach of the restriction.

If you are being paid 3 months in lieu of notice I would speak to the competitor about starting working for them in 3 months time.

The starting point in English contract law (of which this is a subset) is the question of loss. In particular a quantifiable and attributable loss.

A plaintiff has to demonstrate to a courts satisfaction the they have actually lost out (not fluffybucks, real money) as a result of the clause being breached. And it's at that point where most such actions would fail , making the clause "unenforceable".

However as you move into more specialised areas of commerce, where the number of actors shrinks to almost nothing, losses can be easier to demonstrate. However that would have to be balanced against the reputational risk of a company that tries to sue an employee whose role was made redundant. Because it's not a great advertisement for business nous.