Tech staff warned to take non-compete clauses seriously

Legal experts advise staff to negotiate contracts fully before signing them or risk short-term unemployment

Controversial non-compete clauses are becoming more commonly enforced in the tech industry, according to legal experts, who have advised staff to consider them carefully before signing up.

Non-compete clauses are used by employers to prevent staff working at direct competitors within a certain time period - normally six months - and often also include details of non-solicitation law which prevents employees moving to a rival and taking their best customers with them.

Last week, a recruiter blasted reseller Phoenix Software for including such a clause in its staff contracts.

Paul Callaghan, partner at law firm Taylor Wessing, said competition clauses are most commonly enforced among financial services firms but cases that have successfully gone to court in the tech sector are also widespread and are on the up.

"The legal principle is that [non-compete clauses] can be enforced if there is a legitimate business interest to protect and as long as the clause does not go further than is necessary to protect that," he said.

"What that really means is, the more senior the employee and the more confidential information they have in their head, the more likely it will be enforced. They are being enforced a lot more these days than they used to be."

He added that while there is not a general rule for all cases, for top-level executives, a non-compete period of up to 12 months can be enforced and for sales staff, the main concern is to do with non-solicitation of customers.

"What people need to start doing if they don't like them is negotiate when they start a job," added Callaghan. "The problem is people just sign up to these things and don't see there might be issues when they want to leave.

"The most common [punishment] is an injunction, where you literally get stopped from joining a competitor for the period of the restriction and [employees] have to pay the legal fees of the company carrying out the restriction, so it can be really expensive as injunctions are very intense. They can also get sued for damages."

UK companies are not legally obliged to pay staff for the time period stated in the agreement, added Callaghan, who said that staff can risk not being able to get a job for a set period of time if they sign such an agreement.

"You really have to take them seriously," he added.

Jacqueline McCluskey, employment partner at law firm HBJ Gateley, said that non-compete clauses can often be difficult to enforce, so as long as a non-solicitation clause is in place, it is often enough to protect an employer.

"The courts tend to take the view that, where there are restraints preventing solicitation of customers and preventing the ex-employee from dealing with former customers for a period, it is not necessary or reasonable to prevent the employee from working for a rival business as well," she said.