One of the biggest concerns for senior patent and trade mark attorneys considering a move away from traditional practice is whether their clients can – and will – follow them.
In this practical and reassuring guide, Clare Chappell, Partner at Carbon Law Partners, demystifies restrictive covenants in employment contracts and offers clear, expert advice on how attorneys can navigate their exit without falling foul of the rules.
Introduction and summary
Restrictive covenants are clauses in an employment contract that limit an employee’s actions after they leave a company. These covenants aim to protect the employer’s legitimate business interests, including trade secrets, confidential information, client connections, and workforce stability.
Restrictions are commonly included in employment contracts, particularly for senior individuals, professionals, and client-facing roles. Restrictions can only go so far, or they won’t be enforceable – more on this below.
Sometimes, employers include unenforceably aggressive restraints in their contracts in order to intimidate employees and “lock them in” because leaving is made too hard or stressful to contemplate.
While restrictive covenants can seem daunting, remember that they are not always enforceable, and there are steps you can take to reduce the risk of aggressive action from your former employer.
About me
I am a Partner at Carbon Law Partners with over 24 years of experience in employment law. I take a pragmatic view of a situation and always try to put my clients in a better position than when they came to me for help.
My experience includes advising both employers and employees on a wide array of employment law matters. I help people navigate tricky or toxic situations, such as pregnancy/maternity issues, performance management, redundancy, and negotiated exits – and most relevant for your purposes, I help individuals who want to leave their current employment and are concerned about the scope of their restrictive covenants and the reception they will get from their employer when they raise their head above the parapet and resign.
Typical Restrictive Covenants
- Non-Solicitation Covenant: Prevents a former employee from contacting the former employer’s clients or customers with the intention of soliciting their business. This usually requires a positive act of solicitation from the ex-employee, like an active approach to a client offering to work with them in your new firm, or posting on social media inviting clients to get in touch with you at your new firm.
- Non-Dealing Covenant: Prevents a former employee from doing business with the former employer’s clients, regardless of who makes the first approach.
- Non-Poaching Covenant: Restricts a former employee from soliciting employees of their former company to join a new business.
- Non-Compete Covenant: This is the most powerful restriction, preventing an employee from joining a rival employer or starting a competing business for a specified period.
- Geographical Restrictions: These limit an employee from operating within a specific area, typically defined by a radius around the former employer’s location. They are less commonly used these days.
Enforceability of Restrictive Covenants
For a restrictive covenant to be enforceable, it must protect a legitimate business interest and be no wider than reasonably necessary to protect that interest. Reasonableness is assessed at the time the contract was entered into. The courts are more likely to enforce restrictions against senior employees and those with client-facing roles, who are more likely to cause damage to the former employer’s business if they leave and are free to undertake competitive activities.
What Makes a Restrictive Covenant Unenforceable?
- Overly Broad Restrictions: If a covenant is wider than necessary to protect the employer’s legitimate interests, in terms of what is prohibited and for how long after leaving, it will be void. Template clauses that are vague and wide-ranging may be deemed entirely void.
- Protecting Non-Confidential Information: An employer cannot prevent an employee from using skills, experience, and know-how gained during employment, even if it benefits a competitor. There is a difference between your know-how and experience and your employer’s confidential or proprietary information.
- Restraint of Trade: Covenants that are excessively restrictive and contrary to public interest, such as those limiting an employee’s ability to change jobs, (rather than “just” restricting their activities as reasonably necessary to prevent damage to the former employer’s business), may be deemed unenforceable.
- Unsigned Covenants: An employer seeking to enforce restrictive covenants will be expected to show that the employee agreed to the restrictions, typically through a signed copy of the employment contract. Working under a contract without protesting about its terms can also indicate acceptance.
Impact on Professionals Working Closely with Clients
Professionals such as trade mark and patent attorneys often develop close relationships with their clients. Restrictive covenants, particularly non-solicitation and non-dealing clauses, can significantly impact their ability to continue serving these clients in a new role. Usually, restrictive covenants will state that the attorney cannot do certain things for a given period after leaving. However, as a way of reducing the chance that the restriction will be unenforceable, the contract will often provide that the former employer can give consent to the employee working with former clients. I’ll talk more below about how this can work.
For example, a non-solicitation covenant could prevent an attorney from trying to poach, or actually persuading clients of their former firm to instruct the attorney at their new firm.
Similarly, a non-dealing covenant could prevent an attorney from working with clients they served at their previous firm, even if the client actively seeks to continue the relationship. The enforceability of such a covenant hinges on whether it goes further than reasonably necessary to protect the employer’s legitimate business interests. Factors such as the extent of the personal connection between the attorney and the clients, and whether the employer can demonstrate that losing those clients would result in significant business loss, can also be relevant.
Practical Advice for Trade Mark and Patent Attorneys
- Review Your Contract: Before resigning, carefully review your employment contract, specifically the sections detailing restrictive covenants, and invest in expert employment law advice to give you a sense check on the enforceability and limitations of the restrictive covenants. We will also look at provisions enabling your employer to give consent to you continuing to work with clients.
- Document Your Client Relationships: Keep a record of your client relationships and the nature of your interactions. This may help demonstrate the extent to which your personal connections drive client loyalty. (This can also be a useful exercise when approaching your employer in relation to a pay rise or promotion.)
- Be Mindful of Communications during your notice period: When informing clients of your departure, avoid express or implied requests to solicit their business. Simply inform them of your move without actively encouraging them to switch firms. Ideally, agree on messaging with your employer. Again, we will check the terms of the restrictive covenants to understand whether or not you are permitted to tell clients where you are moving to as distinct from that you are leaving your current firm.
- Social Media Caution: Be cautious about social media announcements. A simple update to your LinkedIn profile would generally be acceptable, but avoid any language that could be interpreted as soliciting clients, especially if you’ve been advised that this would be prohibited by your restrictions. An announcement made by your new firm that you’ve joined them is more likely to be acceptable, especially if it just states that you are now with the new firm.
- Seek Specialist Legal Advice: This one bears repeating: have an experienced employment lawyer review your restrictive covenants and advise on what you can and cannot do as you transition from one firm to another, and then what you can do in your new role. I have extensive experience in this area and can provide tailored advice to help you navigate these complex issues.
What is your (former) employer likely to do?
Every organisation will respond in their own way when someone resigns, or when the organisation decides they are unhappy with what the individual is doing next. As such, I can only give examples of what you might expect.
Often, you’ll receive a sternly worded letter. This might be wrapped up in an acknowledgement of your resignation – a reminder of your restrictive covenants and ongoing obligations to your current employer. Alternatively, it might be after you’ve left, containing threats of legal action such as an application for an injunction to stop you from continuing activities the organisation says are in breach of your restrictive covenants.
This can be genuinely worrying – and that’s the organisation’s aim of course. Even if they know the restrictive covenants aren’t enforceable, they want you to question your actions, feel intimidated and worried about the unknown, and facing the prospect of being taken to court.
If you don’t already have a lawyer like me on hand, it’s essential that you take urgent legal advice on this type of communication, especially if it contains threats of legal action, and more especially if it threatens an injunction. There will usually be a lot of pressure put on you including a short deadline to respond. This is not the time to ignore the matter, you need to act quickly to get advice and help to put together the best response.
In my experience, the vast majority of situations can be resolved through communication and negotiation. If the organisation thinks you’re ignoring them, that will merely raise their suspicions even more. Assuming you’ve done nothing wrong (e.g. if you’ve had legal advice that the restrictions are not enforceable, or you haven’t done the things alleged), the best strategy is to talk to them and show yourself to be the grown-up professional that you are.
As your lawyer, I can act as a buffer so you aren’t going to receive any more aggressive communications and we can discuss each step along the way to resolving things. Defending an injunction application and a further claim is incredibly costly and time-consuming. The best thing is to try to negotiate a deal so you can move forward.
What next?
With careful planning and the right guidance, you can confidently move forward in your career while minimising obstacles, stress and potential legal challenges. Seeking expert legal advice is crucial to understanding your position and developing a strategy.
It’s always better to reach an agreement before you leave about what you can do in future. That said, if your employer takes action after you’ve left, there is still plenty we can do to find a workable solution that avoids litigation.
I offer a brief free exploratory chat to get initial information on your situation, explain how I can help, and talk you through the next steps. Once you’re ready to go ahead and instruct me, we’ll agree on a scope of work and a fixed fee so that you know from the outset what you’re looking at in terms of costs.
Just get in touch at clare.chappell@carbonlawpartners.com and we’ll arrange a time to speak.
