By definition, working in a particular industry will often see workers leave to work for competitors.
Can employers prevent employees working for a competitor when they leave? Can employees get round a non compete clause? The answer is potentially yes – to both.
A bit of boring law
The starting point is that it’s unlawful to impose obligations on employees that prevent them earning their living – obligations that are in “restraint of trade”. However, provided restrictions go no further than is reasonably necessary to protect the employer’s legitimate business interests, a court will enforce them.
Reasonableness relates to things like: how long do the restrictions last for? what activities do they cover? what customers/suppliers/colleagues do they relate to? and what geographical area do they cover? The rules around post termination restrictions are very different in the UK compared to the USA. Remember we’re only talking about the UK position here.
What is a non compete clause?
Non compete clauses state that the employee can’t go to work for a competitor of the employer for a given period after they leave. The aim is to protect the employer’s business by giving them some time and breathing space before the employee can work in a competing company or set up their own business in competition with the employer.
What happens when you leave a company for a competitor?
It’ll depend on the terms of your post termination restrictions, on what you do, on what your old employer does, and what your new employer expects and requires of you.
It could be that nothing bad happens, relations are great, your employer has no issue with your future activities and wishes you well with no intention to take action, regardless of the terms of your restrictions. At the other end of the scale, it could be that your employer threatens an injunction if you don’t sign undertakings regarding your future activities. Undertakings are promises confirming that you won’t do anything to compete with the business and will comply with all your post termination restrictions. Undertakings are good for your old employer, because if you breach an undertaking, it would be more straightforward for them to sue you for any losses caused by your breach.
What happens will also depend on the reason you’re leaving your job and joining a competitor. If you’ve been made redundant, it’s more likely that a non compete would be unenforceable, because your employer has chosen to dismiss you, forcing you to look for another job.
Your employer/employment contract may seek to stop you working for competitors after leaving.
Do I need to tell my employer I am going to a competitor?
A contract of employment will often state that the employee must show their post termination restrictions to anyone making them an offer, and must also tell their employer the name of the person making that offer as soon as practicable.
Even if there’s no specific obligation to tell them, it’s a good idea to be open and honest. If you appear to be hiding anything, that’ll only raise your employer’s suspicions and make it more likely they will make life more difficult for you.
Think about it from the employer’s perspective: you want to cut your notice period short so you’re free to start your lovely new job sooner, but won’t tell us where you’re going? Why should we agree to that?! Here, have three months on garden leave instead.
How do I get round a non compete?
You could just ignore the non compete and get on with your plans. This is risky though, especially if the terms are potentially enforceable or if you’re contractually obliged to name your new employer.
It’s better to get specialist employment law advice early on. This could be before taking any active steps, or perhaps before you accept an offer from a competitor, or before you resign, but certainly should be before you actually start work. You can then go to your employer to resign, potentially having to tell them where you’re going, armed with that advice and with an idea of the risks to you if your employer does decide to try to enforce the non compete.
If you’re advised that the non compete isn’t enforceable, then you’ll feel more comfortable about ignoring it and getting on with your plans.
If it is enforceable, or there’s a good chance it is, then you might find that your employer is open to discussion about what is and isn’t OK. Your other post termination restrictions are relevant here. Your employer might be prepared to agree not to enforce a non compete, enabling you to start your new job, provided that you agree not to poach customers or colleagues or interfere with supplier relations in line with your restrictions.
It’s also a good idea to discuss all this with your new employer – for instance, to make sure any targets take account of the limits on your activities during the restricted period.
Overall, as with many things to do with employment matters, open and honest communication can often help smooth the path towards everyone getting what they want, or something they can at least live with. It’s rarely worth burning a bridge.
> Read more about ‘Can a Settlement Agreement include restrictive covenants?‘
Need help moving to your new job?
If you’re concerned about how to navigate a resignation and move to a new job, especially if you’re looking to join a competitor, we can help. Just email us at firstname.lastname@example.org and we’ll arrange a time for a brief, free, initial chat about your situation and how we can help.