7 minute read
SBT Legal
from SBT issue 455
SBT
LEGAL
BY 365 EMPLOYMENT LAW
SECTION 21 NOTICES AND THE QUEEN’S SPEECH 2022
BY MAYO WYNNE BAXTER
SBT LEGAL SPONSORED BY:
I am often approached by employers in fear of lost revenue, after a senior employee has left, as customers often follow those employees. The employer’s ability to protect their customer base is often better if they have well drafted post termination restrictions. Those restrictions must be reasonable to be enforceable. My task is often easier, if the employer comes to me with a contract that I (or even another employment lawyer) has drafted. When I am approached by an employer in these circumstances, they often have pre-conceived views of how the courts deal with these type of restrictions. Sometimes they have drafted the restrictions themselves. The views are often polar opposite, with the stance either being that covenants are never enforceable, or that courts will always enforce them. Neither position is correct.
Contractual Covenants
The starting position in law is that restrictions are unenforceable, as they restrict livelihood, but courts will enforce if they are reasonable and go no further than is necessary. There are 4 main types of covenants that employers should consider, non-solicitation of
customers, non-solicitation of staff, non-competition, and confidential Legal information protection.
Non-solicitation of Customers
This type of restriction is actually as it says, it stops an employee, for a set period, from attempting to secure business from the employer’s customers for a set period. If the set period is too long, it won’t be enforceable. Typically 6 to 12 months post employment are as long as would normally be reasonable, although there can be exceptions.
Non-solicitation of Staff
This type of clause is similar to the
customer one. If an employee leaves, they cannot recruit staff to work for them/their new employer for a set period of time. 6 to 12 months would be the normal length of time.
Non-Competition
These clauses are the most controversial, as for a set period of time, the employee is prevented from competing in their industry, within a set geographical area. For that reason, unless they are very defined, or the employee is senior and/ or in a niche industry they are unlikely to be enforceable.
Confidential Information
This type of clause is almost always enforceable, as it stops an employee from using the confidential information of the employer (eg customer and price lists), from being taken and used. A comparable duty, the duty of good faith, is implied into every contract of employment. If an employee, either in breach of any contractual or implied duty, takes and uses confidential information, then they can be stopped by the employer from using that information, by way of an injunction, and the employer may also have a claim in damages for losses.
I am often asked which clauses are enforceable, and which are not, and there is no real definitive rules, but there are patterns:
1) A restriction on non-solicitation for employees will rarely be enforceable if longer than 12 months; 2) The same is true of other employees; 3) For both of these, a back date is crucial eg no solicitation for 12 months for any customers that they have had personal dealings in the 12 months prior to departure; 4) Non-compete clauses in the digital world are becoming increasingly harder to enforce. If you have a geographical area, how do you define that? Unless the customers are all very local eg a hairdresser, or the company has limited national or regional competition, then a noncompete will only really be a deterrent; 5) It is always easier to bring proceedings, or persuade an employees new employer to settle a claim if there are enforceable covenants;
All is not lost if there are no covenants, or some of the covenants are unenforceable, as the implied duty of good faith is present in every employment contract. If an employee, uses their position to springboard their future employment ie give themselves/ their new employer, an unlawful head start, that they wouldn’t have got in the open marketplace, then that is actionable. This usually involves either the taking of customer lists, or the soliciting of customers whilst still employed. Any employer taking new employees on, should always make clear that such theft is unacceptable. If you are an employer, who now has a percentage of your workforce remote or hybrid working, you should be even more alive to the potential for the theft of confidential information, and the losses it can cause you.
Employers should also always be alert to any issues involving departing staff, and always take proactive advice in how to deal with these issues.
Alex Jones
Alex Jones
365 Employment Law Solicitors
Tel: 01903 863284 ajones@365employmentlaw.co.uk www.365employmentlaw.co.uk
Section 21 notices and the Queen’s Speech 2022
It is estimated that there are some 4.4 million households privately renting in England and that one fifth of renters did not end their last tenancy by choice.
Currently when the term of an assured
Legal shorthold tenancy comes to an end a landlord can serve notice on their tenant to move out of the property with a minimum of two months’ notice. If the tenant fails to leave on expiry of the notice the landlord can commence court proceedings seeking an order requiring the tenant to vacate the property and face eviction, should they not leave. Organisations such as Shelter have been pushing for greater security in the private rented sector for many years and have said that many renters live in fear of eviction. Renters are known to accept poor conditions in a property because of the fear of being served with a Section 21 notice if an issue is raised. In order to combat this and to provide more security for tenants the Government has announced its intention to provide tenants will more secure and higher quality housing. In addition, the Government aims to halve the number of non-decent rented properties by 2030 and create a rental market that is fairer and more effective for tenants and landlords. As part of the Queen’s Speech 2022, the Government announced that it intended it to introduce a ‘Renters Reform Bill’. The main proposals to be included in the Bill are to: • Stop ‘no-fault’ evictions by removing section 21 of the Housing Act 1988. It is hoped that this will provide security for tenants and allow them to challenge their landlord without the fear of a retaliatory eviction. • Alter and strengthen the grounds on which a landlord can rely when faced with repeated incidences of rent arrears. • Reduce the notice period for anti-social behaviour so that landlords are able to regain possession of their property when appropriate. • Create a Private Renters’ Ombudsman to enable disputes to be settled quickly, at low cost, without going to court.
The Ombudsman will cover all private landlords letting properties with the aim to ensure that when a complaint is made, landlords take action. • Introduce a property portal to help landlords understand their obligations and give tenants information to hold their landlord to account. • Set out a legally binding Decent Homes
Standard with the intention to give tenants safer, better quality and better value housing.
The proposal for a Renters Reform Bill was first announced in 2019 as ‘step change’ in the protection for tenants and hailed as the biggest change to the private rented sector for a generation. Whilst the announcement in the Queen’s Speech has been met with guarded approval from tenant organisations and landlord organisations alike, it waits to be seen how long it will take for the Government to publish the White Paper and for the Bill to be provided. It has been announced that the White Paper setting out more detail on the proposed Renters Reform Bill is expected ‘shortly’.
For the time being a landlord is still able to use the Section 21 notice process to recover possession of their property, however, it is highly likely that a landlord’s right to regain possession of their property on a no-fault basis will be removed.
We are able to assist a landlord from service of a Section 21 notice through the court procedure and to the eviction and offer a fixed fee scheme. We can also assist where rent arrears are outstanding. For further information, please visit www.mayowynnebaxter.co.uk.
By Paul Rooke, Associate Solicitor
