Don't Hold Me Back

Dead Wood shackled in NZ by Sarah McMillan

One of the biggest obstacles to leaving your firm and going SOLO is the restrictive covenants in your existing employment contract. Equally if you are taking on staff these contractual terms matter if your firm's book of business is not going to walk out the door. Case law is infrequent so I took note when  Michael Scutt tweeted about his blog on the Farnsworth case.

In this case Mr Lacy had been promoted during the course of his employment but had not signed the new contract that he had been given. He sought to argue that the restrictive covenant, which was for 6 months and prevented him working for a competitor and soliciting defined customers, did not bind him because the contract lay in a draw unsigned.

The obvious lesson for the employers amongst you is not to crack open the celebratory champagne or pay the new salary until the contract is signed.

As always, this case is very much on its own facts. The problem arose out of the take over of Pooles of Wigan as reported here.  The Judge was (rather against his inclination ) deciding a preliminary issue as to whether Mr Lacy was bound by his contract and must suffer a few more months of an injunction that was already in place. He does. The Judge ending up relying on the evidence that Mr Lacy had applied for private medical insurance (PMI) for his family, a benefit to which the new contract entitled him.

The law applicable to the case is basic contract law (paragraphs 19 to 31). The judge had to decide whether the offer in the revised contract had been accepted.  The Claimant enforcing the contract carried the burden of proof. There needed to be "an unequivocal act implying acceptance" and in accordance with the Solectron test this must be "only referable" to his acceptance of the new terms.

While the Claimant started out with five possibilities: revised salary; provision of a better motor car;  enrollment in a profit related incentive plan; movement to a defined contribution pension scheme, and the application for PMI. Only the last was only referable to the contract. Sadly litigants often forget that winning on four points and losing one is still a loss.

Of course if you can't work for a competitor you might be able to set one up, but be wary of any reasonable solicitation covenants as even the legal advice may be expensive and inconclusive.