In the latest of our “Ennis & Co interviews…” series of blogs, we speak to Greg Hughes, a Senior Associate at Clarke Willmott solicitors. Greg is a Commercial Litigation & Dispute Resolution specialist and has a great deal of experience dealing with disputes between employers and employees, particularly in relation to post-employment Restrictive Covenants.
Greg was kind enough to provide his legal insight to bring another angle to a subject we touched upon before in our blog, “Why are we treating each other like this?”
Over coffee, we discussed the idea that, in employer/employee disputes, the law tends to step in where good management (in both directions) has failed; Greg believes that good communication and reasonable behaviour would render it unnecessary for employers and employees to resort to their legal rights.
Whatever the specific nature of the civil dispute between employer and employee, the handling of these areas of contention can be swayed, for better or worse, by the behaviour of both parties when an employee leaves – as, indeed, does the question of whether matters pertaining to contracts of employment become issues in the first place.
Where do relations between employers and employees tend to fall down and result in civil proceedings?
“This tends to happen in the run up to an employee exiting a company, upon or after their exit,” says Greg. “Obviously, when one party decides they’ve had enough of the other, this is the delicate period where relationships can break down. If that seems obvious, what is less obvious to people is that most of the time this simply need not happen. It is very often sheer bad management that results in the estrangement of both parties. It’s commonplace for problems to start when an employee hands in their notice and is suddenly treated very differently, for example being put on garden leave or excluded from day to day activities.”
Are some of these (civil proceedings) more common than others?
Greg maintains that in sales-based roles where client relationships are very important and are restricted to a few key employees, or in roles where access to confidential information such as technical information, financial information, formulas and recipes, post-exit breaches of Restrictive Covenants and the misuse of confidential information are among the more likely to occur.
A Restrictive Covenant is a clause in an employment contract that prohibits the employee from certain activities once the employment contract ends, usually for a set period of time and within other defined parameters. Such activities include soliciting and dealing with clients/prospective clients of the employer, being involved in a business which competes with the employer and soliciting other employees to leave the employer.
In broad terms, it stops you, my employee, from walking out and trying to take all my clients, prospective customers and staff with you, and going to a competitor. Other disputes can centre around unfair dismissal, constructive dismissal and discrimination (age, sex, race, sexual orientation).
Greg reiterates that, “regardless of the particular issue, the existence of these disputes in the first instance is often down to whether both parties have treated each other fairly, reasonably and courteously – most of this comes down to simple good treatment and behaviour”.
In his role, Greg often advises employers and employees on whether or not to pursue a dispute because he knows the cost of doing so (both financially and otherwise) may outweigh the benefits. Many such disputes could be avoided if some reasonable precautions are taken and reasonable behaviour followed.
This idea of “reasonableness” is an important one in law. A Restrictive Covenant should be a “reasonable” restriction, narrowly and clearly defined. The fairness of a Restrictive Covenant that is long in duration is likely to be questioned, even if an employee has signed up to it. A sensible and enforceable Restrictive Covenant is about reasonably protecting legitimate business interests; a broad, unfocused restriction over a long duration suggests an assumption of betrayal, treating an employee as someone who enters the business with the specific intent to do harm when they leave. (Of course, as with any policy, there are legitimate business reasons for having them).
So a good Restrictive Covenant is a reflection of good and sensible – you might even say civilised – behaviour.
Although a Restrictive Covenant is often viewed as something that an employee has to burden, there is, of course, another side to this. Employers who do not respect a new employee’s restrictions from a previous employer are misbehaving, plain and simple. A sensible employer will discuss existing covenants with a new hire – and will respect those restrictions: an example of where a good behavioural precedent can be set early on in an employer/employee relationship.
It is important to bear this in mind, Greg says, because both an employee and their new employer can be liable in law for breaches of Restrictive Covenant, if it can be proven that the employer induced the employee to breach it. The employer is more likely to bear the financial burden if they are unsuccessful in defending the claim or agree a settlement, as they are more likely to have money than the employee. Equally, employees who are treated well in respect of their Restrictive Covenants with their former employer, for example by being allowed to work in a way that does not breach those covenants, are more likely to respect the Restrictive Covenants with their new employer.
Does a candidate with a Restrictive Covenant blow their chance of a new job?
Rarely, says Greg. A really good, senior professional in the right industry will almost always be under restriction and if hiring organisations were finicky about this, they would never get to those good people in the first place. A good candidate will be honest and up front about any restrictions on them, and will give a very good impression of themselves when they demonstrate those professional behaviours. “You wouldn’t expect a good employer to put pressure on an employee to breach a contract and a good employer will respect a prospective employee’s honesty, integrity and commercial awareness of volunteering information about their Restrictive Covenants so that both parties can find a way forward that avoids any breach occurring,” says Greg.
What are companies expecting people to sign up to and is it reasonable?
The reasonable covenants Greg sees are usually narrow, well defined and only sufficient to protect the reasonable legitimate business interests of the former employer, but of course, they tend to get more wide-ranging (quite reasonably) in scope the more senior the role of the employee – the more senior the role, the greater the restriction and often, the greater the commitment. “On the other hand, I have seen unreasonably wide clauses drawn which is bad behaviour, stopping anyone from doing anything. This is simply unfair and goes far beyond what is necessary to reasonably protect the employer’s legitimate business interests,” Greg says.
That’s it for this week – next week, Greg talks about Garden leave.