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Restrictive Covenant - Employment

including wills and probate
Slarti
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Re: Restrictive Covenant - Employment

#117669

Postby Slarti » February 12th, 2018, 4:55 pm

cleanpairofheels wrote:Slarti has asked for the location of the court judgement. (good point)

My son found two cases both of which were USA based in their district court. The cases were linked but were handled separately in the courts:

- The ex-employee for breach of covenant and misappropriation of trade secrets. It was handled out of court and involved liquidated damages.

- The new employer for misappropriation of trade secrets. The USA company was awarded actual and punitive damages.

It may have been a clear case of breach, but these things spooked my son (a bit like reading a medical journal....)

There may have been others but I don't think that he found any UK based examples.


As they were UK based, they are not relevant to your son, unless he is going to work for them in the USA.

Also, as has been said in the thread, I would think that is an unenforceable term of the contract in the UK and probably throughout Europe.

Slarti

didds
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Re: Restrictive Covenant - Employment

#117703

Postby didds » February 12th, 2018, 6:49 pm

I would suggest that it speaks volumes that he wasn't able to find any such case in the UK.

didds

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Re: Restrictive Covenant - Employment

#117729

Postby Gersemi » February 12th, 2018, 8:38 pm

I think it is also significant that the case he found involved misappropriation of trade secrets. Simply moving to another employer in the same field is a different matter.

forlesen
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Re: Restrictive Covenant - Employment

#118006

Postby forlesen » February 14th, 2018, 12:21 am

One point that doesn't seem to have been covered in the discussion so far is whether TUPE should apply. As this sounds like a sale of a UK company as a going concern, I would have thought that it might. In that case, the OP's son should have been consulted with by the outgoing employers, and then transferred on his existing contractual terms.

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Re: Restrictive Covenant - Employment

#118013

Postby melonfool » February 14th, 2018, 2:12 am

TUPE doesn't apply in sale situations. But it doesn't make any difference anyway, whether it applies or not the employer has the same rights, or none, to make contract changes.

Mel

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Re: Restrictive Covenant - Employment

#118238

Postby Clitheroekid » February 14th, 2018, 7:03 pm

melonfool wrote:TUPE doesn't apply in sale situations.

That needs to be qualified. Whilst it's true when the company itself is sold, i.e. there's a sale of the shares, TUPE does apply when it's just the business (i.e. the assets and goodwill) that's sold, as often happens when a company is moving out of a specific area of business and sells off a division.

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Re: Restrictive Covenant - Employment

#118327

Postby melonfool » February 15th, 2018, 10:07 am

Clitheroekid wrote:
melonfool wrote:TUPE doesn't apply in sale situations.

That needs to be qualified. Whilst it's true when the company itself is sold, i.e. there's a sale of the shares, TUPE does apply when it's just the business (i.e. the assets and goodwill) that's sold, as often happens when a company is moving out of a specific area of business and sells off a division.


I know it does, but it was late and it seemed to me in this situation TUPE did not apply so there was no point going down that rabbit hole really.

Yes, selling a division is TUPE. Change of share ownership is not. [usually]

The key difference is if the employer changes.

So, the company could be sold, by change of share ownership, and there be no TUPE, but in two years time, they decide to merge the old co into the co that bought it and dissolve the old co, at which point all employees are now employees of new co and TUPE applies at that point. It can sneak up on you and I think some employers do this later maneuver and ignore TUPE. Key is whose name is on the payslip and the pension scheme.

In terms of changing employment terms - that can be done the same post TUPE as pre TUPE. In that, it's a change of contract and either there is some provision for it to be allowed (in the contract) which is reliable (not all contract terms can be relied upon, some are unreasonable, see the theme of this thread!), or they can consult/gain agreement or they can impose them, or they can dismiss the employee on the current contract and reinstate on a new contract. In those latter two examples the employee may well have a case to bring.

With TUPE, the ONLY difference is that the change cannot be solely as a result of the transfer. So, if the employer said "now you've transferred, we think it's easier if you all change your terms" that would be solely as a result of the transfer and automatically void.

If, however, they said, "since you transferred, the law has changed on x and as a result we need to change your employment contracts", that would not be automatically unfair as it is nothing to do with the transfer.

TUPE itself does not have a time limit and there is no direct definition of what changes are and are not connected to a transfer, though most lawyers agree that the further away from the transfer it is, the harder it would be to show there was a link.

This is slightly muddied by the 2014 Regs which brought in the ability to 'harmonise' employment contracts post TUPE, after 12 months. Harmonise means to bring into line with other terms in the organisation. It does not mean, as my clients keep asking me, wholesale changes to terms you don't much like.

This is also confused by the fact that the original Acquired Rights Directive, from which TUPE stems, does (or did, it may have changed, though it seems not if we were able to bring in a 12m limit in 2014 - I have just checked, the 1977 Directive says: "Member States may limit the period for observing such terms and conditions with the proviso that it shall not be less than one year.") have a provision for a 12m time limit. This is one of the areas TUPE gets a bad name as it is 'better' than the EU legislation.

If TUPE were abandoned, there are some similar right sin the Employment Rights Act 1996, s 218. Not as extensive, but there all the same, buried and unused as TUPE has superseded them (I did need to refer to them once but I can't recall the circumstances).

Mel

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Re: Restrictive Covenant - Employment

#118490

Postby Charlottesquare » February 15th, 2018, 11:50 pm

http://swarb.co.uk/bluebell-apparel-ltd ... -oct-1977/

This was the case oft cited when I was a student, but that was a million years ago and things do change. Always stuck in my head as was re Wrangler jeans, apart from Levis the jeans of choice in the 1970s.

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Re: Restrictive Covenant - Employment

#121105

Postby chris » February 28th, 2018, 4:55 pm

Just to add context to this, I was listening to a radio 4 'In Business' programme where this very issue was brought up that a significant number of US firms had this clause as a standard in all of their contracts and in the US they aggressively sought to enforce the clause. They would make everyone from the cleaner upwards sign this contract and were doing it to protect IP even though most of the employees who had to sign would have no knowledge of the IP involved. The clauses were also written very widely so as to prevent people from working in any industry that was remotely connected in whatever capacity. It was causing real issues since junior employees would have no choice but to sign. It was a lazy way to protect IP and caused real hardship with a lot of people having to be off work for a year if they were changing jobs.

Fortunately the law in the EU has far more protections for the employees than the US, but like a lot of US companies, they just put all restrictions in the UK contract with a clause to say if this is not enforceable then everything else is ok and the fact of this frightens most people from challenging it even though the US company probably know that they can't enforce it in the UK. Whilst the clause may be enforceable if going to a direct competitor, even there they would have to prove that there was a sound business reason to do it and that a year was appropriate or it would get thrown out at court / tribunal depending on how they chose to try to enforce the clause.

Therefore with the duress and the EU protection, your son should be pretty much ok. He should also keep copies of where he asked for that clause to be removed.

Chris


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