An estate agent who set up his own business has been taken to the High Court by his ex-employers over a restrictive covenant.
The contract of employment stated that Simon Robertson was not to set up a business within five miles for 12 months from his departure from the firm, Tim Russ.
The contract was never signed by Robertson but he nevertheless worked for Tim Russ and Company, as an assistant branch manager, for four and a half years before leaving to start up his own business, Robertsons Estate Agents, in Penn, Buckinghamshire.
On the day he started, he received an injunction.
An earlier hearing decided that the judge would need more time to consider the case. In the event, the hearing took two and a half days and ended this week. It included a cross-examination of Robertson, who defended himself in order to save up to £10,000 in legal costs, which lasted nearly three hours.
His former employers required staff to enter into restrictive covenants that lasted for 12 months following termination of the contract. They included an obligation not to solicit its customers, an obligation not to solicit its employees to leave their job, and an obligation not to set up in business within five miles of the branch in which they worked.
Tim Russ, which has four offices covering Buckinghamshire and south Oxfordshire, claimed that Robertson had breached all these conditions when he left.
In court, Robertson admitted to taking a database with him, in the form of Outlook, but insisted that this listed his own friends and relatives, plus a few historic clients.
The High Court found that Robertson had, however, breached the clause requiring him not to solicit Tim Russ’s customers, and this was shown by him having taken his Outlook contact list. This justified an injunction.
However, the court decided that the fact that he had set up in business within five miles should not be held against him as that clause was too wide to be enforceable.
The court said that although five miles was a reasonable distance given the nature of the business, most of Robertson’s work for Tim Russ had not involved recurring business and was therefore not capable of creating a customer connection worth protecting.
The restriction on him from setting up in business within five miles was therefore held to be unreasonable and so it was unenforceable.
This week, Robertson reopened his fledgling business, which he had had to shut down for two weeks.
At his former employers, Tim Russ declined to comment.
Restrictive covenants are very common in estate agency, but it is rare for cases to actually get as far as court when breaches are alleged. Most cases are settled before that point. The fact that Robertson had not signed his contract was irrelevant: even if employees do not sign contracts of employment, they are usually assumed to have accepted their terms and conditions once they start work. It is therefore essential that any prospective employee looks hard at the employment contract and specifically raises any issues that they might have.
Comments
Should he have not then been awarded compensation?
restrictive covenents, continuing obligations in contracts rareley stand up, a court will never stop a person earning a living, Data Protection however should be an offence.
What I find interesting is that the Court did not find the former employee guilty of breaching the data protection act. The fact that the employee stole names and contact details from that database is appalling and I thought a criminal offence. Whether these were historic clients or not. As for the relatives details on the outlook database - the database did not belong to Robertson but to his employers so Robertson had no excuse or right to take that.
In my view the employee should have been fined a large sum of money and been banned from being an estate agent as in stealing company cofidential and data protected information i.e. the clients details is an utter disgrace. How could you trust someone like that in business, he does not deserve to succeed.
As for the restrictive covenent, 5 miles seemed excessive but 2 miles would have been reasonable.
Simon
I shouldn't think your ex boss was worried about your friends and relatives (which you almost certainly already had and wouldn't need to take if that was the case), it would be the few historic clients.
Not worth worrying about anyway and certainly not worth legal action.
stonehenge is correct.
These types of restrictions after employment, even in a contract, aren't worth the paper they are written on. I had a contract checked out once and basically a former employer cannot restrict you from earning a living. The employer can try to intimidate, threaten and even drag you through the courts to stop you - the best they can hope for is for you to run out of money to fight the case.
You cant help but gravitate to Simon on this – the Outlook thing was a bit clumsy but it does appear his old mates up the road were a bit cross and decided to get all silly and ‘see you in court’ about it and fluffed the whole thing on the day by not really having much of a case, or at least one as good as they thought they had.
Jonnie
Whats the point of a contract that has not been signed? It is the company's issue to have you sign it if they have certan codes and clauses for you to follow. If you refuse to sign, then you naturally would have to leave, without any commitment to that contract.
I'm glad the court came to their conclusion.
Best of luck in your new venture, Simon.
Please note I didn't copy 'the database'.
'In court, Robertson admitted to taking a database with him, in the form of Outlook, but insisted that this listed his own friends and relatives, plus a few historic clients'.
I wanted to leave on good terms and had no intention of copying any lists of clients. I have been an estate agent for 24 years and I have never heard of anyone being taken to court for moving to a rival agent or setting up your own business.
How unfair. The court has it wrong......
5 miles was too big a radius but it's typical of employees to raid your data base and set up in competition when they leave! Hope someone does this to him in a couple of years time and see how he feels when the boot is on the other foot! What goes around -comes around......... watch your back
Copying the database was unfair and exactly why most leavers are given immediate garden leave.
It's very difficult to enforce restrictive clauses unless a business relies heavily on repeat business.
The main reason why these restrictions fail is that is is a restrain of trade and prevents an ex-employee from earning a living. Even if Robertson were to have gone and worked for a rival within 5 miles nothing could have been done either to have prevented this, so I'm surprised Tim Russ even bothered.
Taking the datapase wasn't clever though!
Dont understant why companies can tell you where to work. Its a joke I left for the company next door years ago my employer told me about this class, I had a two word answer.
As far as i know CW has always said they would persue it. Never gone to court though. Same with Mortgage advisers. Lots of threats but no action.
Have these clauses ever actually succeeded in court? Had one from a previous employer some years ago (Countrywide) restricting employees from going to the competition!