Until the late 90’s it was often thought that so long as an
employee continued to be paid, the employer could place them on
garden leave, even if there was no clause in the contract allowing
for this.

In 1999 a piece of case law changed this (William Hill v
Tucker ([1999] ICR 291)), in which we were told that most
employees, if willing to work, had the right to do so. If they were
to be sent on garden leave, there had to be an expressed clause in
their contract, that stated the employer had the right to place the
employee on “Garden Leave”.

‘Project Chaos’

However, a recent case (SG & R Valuation Service Co v Boudrais
([2008] EWHC 1340(QB)) has put an important qualification on this
right to work. In this case, senior employees were planning to
leave and take confidential information with them with the
deliberate intent of causing mayhem (under the worrying title of
‘Project Chaos’).

They were placed on garden leave and then claimed this action from
the employer was a breach of the employment contract because there
was no expressed right for the employer to take this action against
them.

The Case was heard at the High Court, where it was held that they
had a right to work, but that their actions showed they were not
‘prepared’ to do so properly, in accordance with their contractual
duties of good faith, therefore they were in breach of contract!
As such, it was not possible for the employer to provide them with
work – the garden leave was upheld despite the lack of a clause in
the contract.

At Deminos we make sure that any work carried out compiling
contracts of employment or any other legal documentation for our
clients takes into consideration recent rulings from case law, in
addition to current legislation.

Our clients who have used our services to obtain contractual
documentation, such as employment contracts, have peace of mind and
can rest easy knowing their documentation is compliant with current
legislation, for example we can include a specific ‘garden leave’
clause which will prevent any problems arising in the future.

Those of you who are not currently using our services but would
like assistance with regard to the drafting of contracts of
employment and other compliance documentation please contact us now
on 0191 460 1111.

What is the purpose of a Restrictive Covenant?

Every business has proprietary information that it is crucial to its success. Restricting the use of this information by employees when they leave is vital in order to protect your market position. 

An ex-employee who has been privy to your client base and trade secrets may be an attractive asset to a competitor seeking access to your market. 

As an employer you will naturally want to protect the use of this information by the inclusion of restrictive covenants in the contracts of employment of senior or key staff. 

However an employer is NOT generally entitled to protect himself against competition from his ex-employees. So where a non-compete clause is enforced it has to be to protect a legitimate business interest – for example, client connection or confidential information – and not simply to stifle or prevent competition. 

The standard types of restrictions which can be used by employers are: 

• restrictions on the former employee working for a competitor – commonly known as area covenants;
• non-solicitation covenants – which prevent poaching clients/customers of the former employer;
• non-dealing covenants – which prevent a former employee from dealing with former clients/customers, regardless of which party approached the other;
• non-solicitation of staff covenants – which usually are restricted to those employees the former employee had material dealings with in a defined period prior to the termination of their employment. 

For a restriction to be reasonable it must not be drafted too widely. It will be for the employer, in the event of a clause being challenged, to show that the clause is justified and sufficiently narrow. To meet these criteria an employer must be mindful of certain factors: 

• The breadth of the geographical area of any restriction and length of time of the post termination restriction must be justified. It is unlikely that a wide geographical area will be justified and, as a general rule, a restriction for more than twelve months(1) will be difficult to justify.
• Regard will also be had to the type of interest being protected, for instance, information such as trade secrets may be granted a wider area of protection than information regarding customer information, given that its potential use across markets is wider.
• An employer may also be required to provide evidence any connection between the employee and any information that is being protected. 

The extent of clauses, therefore, must be relative to the employee’s position within the business. As more senior employees will be in contact with more sensitive information, restrictions placed upon them may be justified as being more onerous. Overall, a one-size fits-all policy on restrictive covenant clauses risks the clause becoming unenforceable and therefore not being able to protect your business. 

It is advisable to draft each clause separately. That way, should any single clause fail for reasonableness or necessity, it may be severed from the contract by the court without affecting any of the remaining clauses. Restrictive covenants may also require periodic review in order to maintain their enforceability and reflect the activities of your competitors and market trends. 

For help or advice on protecting your business, please call Deminos on 0191 460 1111 or email info@deminos.co.uk 

(1)Judgement in ETA by Wyn Jones (Kynixa Ltd v Haines), in which he concluded that 12 months is considered a reasonable period and that, although the restrictive covenants were very wide, even so they were reasonable and enforceable. 2008

 
TUPE is one of those areas that seems to scare more employers than it enthuses.  TUPE 2006 is the main piece of legislation that protects employee rights during takeovers and transfers.
 
In simple terms, if company A takes over company B then company A inherits, and has to abide by, all Company B’s employee’s rights, obligations and liabilities.  These include employee start dates and their existing contractual terms.
 
So far so good – but it gets more complex if, for example, an existing contract is split between two contractors:
 
Let’s say one new contractor carries out 71% of the contract and the other 29%.  Surely you split the transferring employees accordingly – 71% go to one contractor, 29% go to the other?  Not so said the Employment Appeal Tribunal in the case of Kimberley Group Housing Ltd v Hambly. This is what you do:
 
1)  First check that each individual employee is ‘assigned’ to the transferring activity. This involves the classic tests of how much time each employee spends on it, costs and income attached to it for that employee etc. and then:
 
2)  Pass all employees (100%) to the contractor who took over the majority of the activities, i.e. the 79% holder.
 
Nice and simple, but (and there is always a ‘but’ in law) this case will only apply where the contract involves the exact same ‘activity’ being split between the two new contractors.  (Here it was the processing of asylum applications.)
 
If the contract can be split into two different activities, each one now to be performed uniquely by one of the two new contractors, then a division of the workforce will take place. A typical example would be a contract for printing and marketing that is now to be split between two new contactors, one doing the printing, and the other the marketing.
 
The test in (1) above will now have to be carried out for each employee to determine whether they are part of the printing or the marketing activities.
 
If there are so many new contractors that is it is now impossible to see where the activity has gone, or if it is even being carried out at all after such fragmentation, then TUPE will not apply at all.
 
We love TUPE…
 
For further information on this and other employment issues please contact anyone of the team at Deminos 0191 460 1111 or email info@deminos.co.uk