Restrictive covenants - does anyone know what's reasonable?

[snickersnack]

Bit of background - I work for a small company providing quite specialised financial services. Everyone at work is being given new contracts ? we have a new HR director who started last month and she?s doing her bit to stamp her authority on the company.

I?ve just been sent a draft contract ? all looks fairly standard apart from the bit on restrictive covenants. This says that I can?t work for anyone (including myself) in any capacity that may be deemed to compete with my employer for six months after I stop working for my current employer. So no freelancing, no working for a competitor etc. This effectively renders me unemployable, I think ? it?s not the kind of industry where anyone is going to wait 12 months (6 months notice period plus 6 months of restrictions) for me to be available however much they wanted me, and what would I do in the meantime?

Is this fair? Can I challenge it? What would be normal/reasonable?

It?s an entirely new provision ? not something that has ever been in there before. What I do is quite specialised - there aren't lots and lots of competitors out there, but there are some. I don?t have any plans to go and work anywhere else at the moment, but that might change at some point in the future and it?s also possible I might want to stop work and freelance at some point. I?d rather raise it now than have to try and challenge it later in the courts. My Chief Exec is very reasonable but it would be fair to say that the new HR woman is not.

In my industry, it is fairly common at a senior level to have a 6 month non compete - I have heard of them being a year for the sales staff.

Generally though, what happens is that people tender their resignation and do not work their notice as the company don't want them spreading it around as to where they are going, so are just paid off. Giving you 6 months paid time that you can do anything or nothing in.

have seen this before in IT industry contracts - CMOT is quite right, yu just end up not working your notice

'gardening leave', they call it

I very much doubt I would be paid gardening leave - they'd want me there working until the end of my notice period if I was being paid. The financial circumstances of the company wouldn't really allow them to have me sitting at home doing nothing. It's more the six months after that that is worrying me - when I wouldn't be being paid and I wouldn't be able to work.

I think I'm probably going to have to speak to a lawyer about it and see if it's fair or enforceable. We're a really small company and have always worked very much on trust and loyalty - this all seems a bit over the top, and not really the way we've always done things.

whether it is deemed reasonable will depend very much on the individual circumstances (e.g your level of seniority, the exact wording of the clause, the marketplace in which your employer operates, length of the restriction etc). Here www.out-law.com/page-7086 is a useful summary guide but the exact wording of the clause is crucial and therefore it is a good idea to get legal advice on exactly what is being proposed as hopefully you can negotiate more appropriate wording

you could argue to have any garden leave period taken off your six months covenant but otherwise 6 months sunds pretty reasonable to me for a senior specialist in a niche industry.

How easily it could be enforced will depend on the wording and on all surrounding circumstances, including at the time of attempted enforcement.

But the bottom line is, you are already employed, this a proposed, draft new contract, and if you're not happy with your new terms and conditions, don't sign it, and propose amendments to be made that would be more acceptable to you.

It doesn't matter how reasonable or not the new HR Director is. She will have come in, and either raised contracts and restrictive covenants as issues that need addressing, or may have been specifically asked to address them. Even if she proposed 6 months, that and all other changes will certainly have been approved by the Chief Executive before the contract being issued. Similarly, if you don't want to sign the proposed new contract and want instead to propose amendments to the timescales or wording or other aspects, it will be up to the Chief Executive whether those amendments are accepted or not.

So if your Chief Executive is reasonable and you propose some amendments that are workable, you should be fine.

If you don't sign it, then make it clear WHY you're not signing it: ie make it clear that you don't accept the new covt, otherwise by continuing to work and be paid, you could be deemed to have accepted it. Try to get the set off for garden leave, covenants aren't unusual in most jobs where if you joined the opposition you could pose problems. they will be enforceable if they are reasonable to protect a legitimate business interest of your employer, so getting the wording right now is important.

My contract has a six month restrictive covenant (plus six month notice period) but the covenant doesn't stop me from working for someone else, but it does stop me from approaching clients. I don't think you should sign something that effectively stops you from working for six months.