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is this illegal?

 
#1 is this illegal?
27/07/2009 19:04

who do they think they are?!

So you're working for a small company bought by a larger company (presumably TUPE applies) and when one of the former employees sets up a rival business and staff start defecting the new owners issue new contracts with a clause that "you will not go and work for a competitor within 12 months of leaving".

This new contract is to be signed by a certain date or else it will be taken as you are resigning! (no pressure then!)

Surely this is out of order / illegal on 2 counts:

1. staff were transferred under TUPE and original contracts with the small company did not have such a clause so can this new contract/clause be imposed especially in the manner it is - with a threat?

2. how can anyone not go and work for a competitor for 12 months (new contracts have been issued to all staff including the most junior / recent starters who only have 1 month notice periods). Isn't that the point of notice periods / gardening leave if appropriate? Surely this clause is a career killer and no other consulting firm (or any company) anywhere insists on this.

Illegal and/or bully boy tactics in the extreme?

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#2 RE: is this illegal?
27/07/2009 20:02

Gordon Gecko to who do they think they are?! (#1)

In general, restraints of trade are legal only if they are not too wide in their scope. Any competitor for 12 months seems to be a bit excessive. The restraint is therefore likely to unenforceable, but take it up with a good employment lawyer - couple of hundred quid will get you some rock solid advice. If there are more than one of you, put in some money together and it will cost even less. I think the case law in the UK is Nordenfeld v Maxim machine gun company.

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#3 RE: is this illegal?
28/07/2009 08:54

Mars A Day to who do they think they are?! (#1)

I second Gordon's advice to talk to a lawyer to be absolutely sure, but my understanding on both points is:

1. To replace an existing contract with a new one, without your explicit consent, the new contract must not offer a denigration of terms, or else must offer an improvement of terms. You could probably claim constructive dismissal if you were fored to resign for not signing it.

2. Such covenants are - in the real world - unenforceable unless they are both specific in remit and intended to protect a real business interest. It would be feasible to name specific competitors in the clause for example, where they are competitors in a particular niche, but from the sounds of it you could effectively ignore this clause. A lawyer will immediately point to the fact that the interpretation of 'competitor' is left open - making it contrary to both free trade and probably even habeas corpus.

My advice is sign the accursed thing and forget about it: in reality the clause will not affect you at all.

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#4 RE: is this illegal?
28/07/2009 09:05

Cynic to Mars A Day (#3)

Remember also that if you sign a new contract with a new company (rather than TUPEing across), you will in effect become a 'new' employee. At which point you can be dismissed without reason within the first 12 months and you will also lose any entitlement to redundancy pay that you may have built up.

Sounds like a classy outfit. Name and shame?

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#5 RE: is this illegal?
28/07/2009 11:06

who do they think they are?! to Cynic (#4)

Thanks for the comments especially the one about starting at zero if signing a new contract rather than TUPEing across.

Am about to walk so naming and shaming not an issue for me but don't really want to land my (soon to be ex-) colleagues in a heap of trouble. Not just yet anyway!

However a clue...

...medium sized consultancy group (occasionally advertises here) that is growing rapidly through acquisitions (so rapidly that due dilligence on the companies they are buying and looking after staff seem low on their list of priorities!)

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#6 RE: is this illegal?
28/07/2009 12:07

Mr Cool to who do they think they are?! (#1)

Legal advice and medical advice! Two things not to get from a forum. Ah well, here's my 2p worth (although I do have a law degree and won 15k last year in a tribunal case).

Have a look at www.direct.gov.uk and type in employment law. Its the definitive and correct guide on the law in this area.

All other advice is "almost correct to some degree" - which sadly in the case of a legal matter is the same as being wrong.

No offense to the respondents above!

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#7 RE: is this illegal?
28/07/2009 13:30

well here is a spin on it to Mr Cool (#6)

It's only illegal if you get caught.

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#8 RE: is this illegal?
28/07/2009 14:54

Mars A Day to well here is a spin on it (#7)

Spin you've been following me on the weekend haven't you!

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#9 RE: is this illegal?
28/07/2009 15:50

Gordon Brown to well here is a spin on it (#7)

Just to clarify....it only illegal if you get caught and you are not an MP.

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#10 RE: is this illegal?
08/08/2009 19:46

Kim Jon Il to Gordon Brown (#9)

Hey Brownie, would you like to become my deputy?

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