Lawyer: Non-compete clauses unjustified in most cases

Expert claims junior staff should not be legally restricted from moving to rivals

A legal expert has claimed non-compete restrictions are not justified in most cases and should only be considered – if ever – for top-level staff with access to highly sensitive information.

The controversial practice was brought to the fore again last week when Phoenix Software came under fire from a recruiter after a rival reseller was forced to bow out of a legal battle to break a non-compete clause and pinch a Phoenix staff member. The VAR backed out for fear of throwing up to £100,000 at a case it was advised by lawyers it might not win.

Non-compete clauses are included in some contracts in an effort to prevent staff moving to a direct competitor too soon after leaving the company – usually between six and 12 months – in order to prevent them taking valuable business info, contacts and intellectual property with them.

But Peter Doyle, senior partner at Doyle Clayton Solicitors, said that such clauses are only ever justifiable for senior staff with access to "trade-secrets", not just to protect general business knowledge and contacts, which would "not normally justify a non-compete restriction," he said.

"[The clauses are] aimed at preventing employees who possess trade secret information or similar joining a new employer for a limited period to give some protection to the employer for those trade secrets."

But he warned that because of this, companies often exaggerate the importance of a departing staff's role in order to claim they had access to highly sensitive info in an effort to enforce the clauses.

"Any argument over trade secrets needs to be examined very carefully as often there is no such information or the position is exaggerated," he said. "Or, in reality, the employer is trying to prevent the employee from using their general know-how or skills [not] acquired practising their trade or profession for their employer, but built up over many years working for various employers."

Scott Fletcher, chairman of Manchester-based VAR ANS Group, argued that non-compete clauses can sometimes be justified when used "reasonably and in moderation".

"If there is a specific local competitor and your staff are constantly getting poached or interest from [recruitment] agencies, you can understand the other side of the argument – you have got to protect yourself," he said.

Taking low-level recruitment issues to court frequently can mean businesses risk losing sight of the bigger picture, said Kieran O'Connor, sales director at VAR Total Computer Networks.

"We get some people who come and work for us and bring useful things with them and then we lose some too; it's the way of the world," he said. "To go to court is a bit of a waste of focus – you [would] forget what you're trying to do: be a successful business."