On non-compete agreements

I am being asked about ‘non compete’ clauses in settlement agreement contracts. These are often overreaching but, if so,  are they enforceable? Here are my notes …

I found this page, from the Citizen’s Advice site. They ensure the advice is accurate for the differing nations of the UK and I quote from the English page.

As ever, your contract will trump the law, unless the agreement contains an attempt to negate statutory rights, but contracts and settlement agreements often contain non-compete clauses. This is an attempt to stop someone working for a competitor. The CA site states that these must be reasonable.

If your employer says you can’t work for a competitor

This advice applies to England

When you leave a job some employers will say you can’t work for a similar business for a certain amount of time. They could also say you can’t set up a business that competes with theirs.

Your employer might want to limit what work you do next if you could take their customers or if you know confidential information.

Your contract might restrict what work you can do next, but your employer can only do this if it’s needed to protect their business. If there’s nothing in your contract you can take any job you like.

Check if any restrictions apply to you

Look in your contract or terms and conditions of work for wording like ‘You can’t work for a competing business if it’s less than 10 miles away’. It should also say how long the restriction lasts – usually 3 to 6 months.

Restrictions like this could be under a heading that says ‘restrictive covenants’ or ‘post-termination restrictions’.

You’ll usually have to follow restrictions like these if they’re written in your contract. This includes restrictions in any other documents you’ve signed, such as a deal to settle a dispute with your employer.

You can work for whoever you like if there are no restrictions in any documents you’ve agreed to

If you’re not sure about something in your contract, contact your nearest Citizens Advice for help. Bring your contract with you if you come to an appointment.

If you don’t have a written contract

It’s very hard for your employer to claim a spoken agreement includes a restriction on who you can work for. These restrictions have to be precise and specific, so it’s unlikely you’ll need to follow one that isn’t written down.

Look at whether the restriction is reasonable

No matter what’s in your contract, your old employer can’t stop you taking a new job unless it could lose them money. For example if you might:

  • take customers to your new employer when you leave
  • start a competing business in the same local area

If a restriction would stop you getting a job that didn’t affect your old employer, it might not be reasonable. A restriction might also be unreasonable if:

  • lasts more than 6 months – unless longer is normal for your job title or industry
  • applies in places where your old employer doesn’t do business – such as if it mentions a whole region but all their customers are from 1 town
  • applies to jobs that don’t compete with your old employer – for example if it says you can’t take any sales job, even selling different products
  • means you wouldn’t be able to find a job at all

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