1 Employment Law Update 2005 Justin Patten & William Josling 29 th November 2005

2 Outline of workshop What needs to be within a contract of employment? What are the employer’s obligations regarding sickness, notice, salary and holiday? How do you undertake a legal disciplinary and grievance procedure? How can you tell if someone is employed or self- employed? What needs to be within a restrictive covenant to be successfully enforceable? What are the common pitfalls that employers make?

3 What are restrictive covenants? Restrictive Covenant clauses aim to prevent workers from engaging in their competing trade or profession after employment From an organisation’s perspective the goal of the restrictive covenant is to protect its legitimate commercial interests All restrictive covenants are initially deemed void as they are regarded as restraints of trade It is for the ex-employer to satisfy the court that it has a legitimate business interest to protect

4 What are the variables the employer should consider? What is the commercial interest being protected? What is the seniority of the employee? What are the scope of the job duties? What is the geographical area of where the employee worked? Did the employee bring any clients with them? What is the length of time of the restriction being sought?

5 The approach of the Courts In recent years Courts have shown a willingness to enforce restrictive covenants Provided employers draft the clauses carefully they can be successfully enforced Conversely clauses will be unenforceable if unreasonably wide It must be reasonable in terms of subject- matter, geographical location and time

6 What are the type of restrictive covenant clauses? There are 3 types of clauses: Non compete clauses Non solicitation and non dealing clauses Non poaching of staff

7 What are non compete clauses? Prevent a worker from setting up a competitive business within a defined area and over a set period of time Their basis is that confidentiality clauses would not go far enough to protect the employer’s business interest Preparing to work for the competition is not a breach of contract nor a sackable offence

8 What are non solicitation and non dealing clauses? Prohibit the employee after they have left employment, from actively contacting clients, customers, suppliers etc As long as the restraint is reasonable - then such clauses should be enforceable What is reasonable? Consider clients brought by that individual

9 What are non poaching of staff clauses? These clauses ensure that key personnel do not leave their employment after the departure of another key worker Increasingly Courts are now asserting that employers do have a legitimate business interest to protect in maintaining a stable workforce Therefore a clause which prevents ex-employees from soliciting people that they worked with and persuading them to join a new enterprise should be enforceable Focus upon limiting the restriction

10 How wide can the restrictive covenant be? The extent of the area must be reasonable within subject-matter, geographical location and time The reasonableness of any geographical restriction will depend on the nature of the trade and the competition It has been shown that 1.2 square miles of their former office covenant can be struck down Alternatively a radius of 10 miles was upheld because the area involved no major commercial centres

11 Tips For Drafting Be conservative Never extend beyond 12 months Never extend beyond 10 miles and the less, the more chance of successfully enforcing Impact of internet undermines geographical significance but time factor and subject matter remains important Watch the category of employee, client and supplier protection

12 Questions