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Being made redundant - I have a restricted covenant (recruitment consultancy)

Being made redundant - I have a restricted covenant (recruitment consultancy)

Hi everyone,

I was told recently that I have to go through the motions with regards to possibly being made redundant. As far as I can tell the MD has thrown the towel in anyway, but I believe that the MD is just going through the official motions anyway.

My concern is that although 50% of the staff (including me) are being made redundant the business will still trade. Now I have a very good reputation in my sector of recruitment and I want to ensure that I am still recruiting the same people as I always have been, after all it took me a long time to build my reputation.

BUT - as I signed a contract with a restricted covenant in it when I first started with them I am concerned that the covenant will still be in effect after I am made redundant.

To me this is unfair. Surely if there is not enough work going round in the company to justify myjob there then they can not really complain if I go to a competitor. Can they? My competitors will know of all of the clients I deal with anyway as it is a well known sector.

The MD is very good friends with a solicitor and has taken people to court over this before. These individuals actually set up a rival company overnight. What if I was to join them?

After all, I am being made redundant here!

Thanks in advance for the advice.


7/18/2009 4:23:25 PM

Sorry, but whether or not you are being made redundant isn't at all relevant. The only thing that matters are the terms of the covenant. Many are unenforceable (no - not because of redundancy), but you cannot by any means rely on that, especially if your company has a reputation for being litigatious. I would have to advise you to take specialist legal advice (from someone who deals with restrictive covenants on a regular basis - not from an employment specialist per se, because they may not have much experience of this). Whilst many are unenforceable because the employers do not know how to draft one properly, if they have been drawn up with good legal advice they are very much enforecable, and being sued is a costly way of finding out.

I should also warn you that this issue aside, you need to be very careful. No downloading of client lists, no copying of files - no doing anything that could be construed as taking business information or poaching clients. Or the restrictive covenant will be the least of your worries. Companies tend to watch staff very closely in these circumstances, and can and will dismiss if you appear to be doing anything that threatens them. If in any doubt that a legitimate activity could be construed in the wrong way, either don't do it or tell your manager what you are doing and why. In writing. Keeping a copy. Off the premises.


7/18/2009 5:07:34 PM

Thanks a lot for the advise and the quick response. I would never dream of doing anything like taking information ever, let alone at the moment. I have always known that the PC I work on has a lot of spyware programs and even one that knows what keystrokes you type and sends it to a downloadable file...the ex IT guy told me after they fired his services over something immoral....I still don't know what that is!

As for the covenant. It does seem like it is drafted up properly. Especially as some people did go off and set up in competition, they were later sent to court but my MD did not win.

What really concerns me is the covenant wording and it seems like it is restricting my right to get furture employment. It states that I am not allowed to enter into employment either with a current colleague (whether at a company or to set up with said employee) or I can not enter into employment with anyone who used to work for my current employer.

So basically that means that ALL of the consultancies in my local area are off limits as each company has someone who was employed by my current MD. So I won't be worth the base salary that I require to put food on the table. In all serious, I may have to move to a smaller house to accommodate the drop in salary. My kids then will have to go to a different school and not the best one in the area as the catchment zone for the best school in town is not large and the houses are expensive.


7/18/2009 7:09:52 PM

I am not telling you it is enforceable (although none of the things that you have stated, whilst important to you and your family, are relevant in law) - I am telling you to get proper advice before you do anything that might be enforceable. This area of law is very specialised, and it depends on a balance being struck between restraint of trade and the right of a business to protect it's interests. I can't even SEE the covenant, never mind tell you how enforcable it is! And I wouldn't even try - this really is specialised work, and technically it is contract law rather than employment law. All I can tell you is that I have seen and heard of them being enforced - but more often than not they aren't worth the paper they are written on.

Oh, and I wasn't suggesting that you would. But dismissal is cheaper than redundancy, and you wouldn't be surprised how often people here find that that "thing" they did (innocently, and sometimes not so innocently!) gets them sacked. I find it saves time and trouble for us all to warn people BEFORE they do it :-)


7/18/2009 9:50:26 PM

Yeah it wouldnt surprise me that a quick firing will be a solution. The industry I work in is very cut throat and you can be marched out of the door in minutes. Thanks again for all the advice, it is taken on board!


7/19/2009 8:09:27 AM

Just to add, as a rule of thumb and restrictive covenant will only be enforceable if it protects the employers legitimate business interests, and only if it applies for a specific and reasonable time period (usually six months maximum, unless very senior staff).

In practice what this means is that you cannot go after any on your employer's clients or use your knowledge of their products or practices to damage their business. They cannot restrict your ability to work at all, and I would suggest that trying to restrict your ability to work for any company who happens to employe a former colleague would not get very far.

But as Shikahra says, this is a legal issue, and this might only be resolved in court. If in any doubt you should get some specialist advice, and you should also discuss/disclose the covenant to any future employers.

monkey steve

7/20/2009 2:25:44 PM