Analysis: Legal threats are liable to backfire

Recent legal settlements between PR employers and their staff have focused attention on cases where good faith disappears and the only avenue open to people is the legal one.

One of the more startling details to have emerged from the recent breakdown in relations between hatch-group and Brian MacLaurin is the non-compete clause inserted in the departing MacLaurin's settlement.

Not for MacLaurin a simple clause warning him to stay away from hatch clients for the next six months. Instead, for two years, as well as being banned from hiring hatch staff and pitching against hatch, he is not allowed to employ more than one account handler and one administrator.

Yet while these onerous conditions have come as a shock to some industry onlookers, lawyers who specialise in employment issues within the PR industry are not so surprised.

After all, MacLaurin had hardly agreed to that contract as a regular employee. Rather, when he signed he had just sold MacLaurin Media for a seven figure sum - he picked up £4m himself.

That difference, in terms of what can reasonably considered to be enforceable in a non-compete clause, is vast. One lawyer who represents many PR agencies and practitioners, is Lewis Silkin joint head of employment Michael Burd.

He says the law takes a different view of contracts between employer and employee compared to those governing a business purchase.

Whereas the law has traditionally viewed the employer/employee dynamic as a master/servant relationship, in which the latter is at a disadvantage, it sees no such imbalance in a share-sale agreement.

As a result, compare non-compete clauses ('restrictive covenants') in the two types of contract, and you are likely to see far more onerous conditions in the share-sale agreements.

MacLaurin himself, for example, says he doesn't believe the restrictions are unfair given the sum he received for his business. But that is not to say employers don't try and get away with something similar from time to time.

One PRO, speaking on condition of anonymity, recalls a covenant which restricted him from doing business with any organisation the company had ever dealt with, for good - and in a relatively small, specialist field within PR. He compares it to 'a plumber being told told he can't work with pipes again'.

Attempts to be too draconian often backfire. One comms head was escorted from the premises by security after a disagreement over outside work.

Pressure was put on him by management to agree a deal quickly but the PRO consult his union instead. Three months later both sides agreed a deal, which for the PRO was notably better than the one first offered.

Additionally, Burd says there are several agencies in London that routinely oblige staff to sign clauses which have huge scope and cover an indefinite period: 'These agencies know, and their lawyers know, they won't be able to enforce these contracts. They're more likely to use them as a pretext to mess around and distract the person they're seeking to restrain,' he says.

Burd says while the law has 'tolerated' restrictive covenants, it 'doesn't like them very much', given the legal doctrine against restraint of trade.

For that reason, it is essential any such agreement protects a legitimate business interest and is reasonable in its scope. While confidentiality, client data and senior staff can all be protected, there are limits. Burd, for example, says any clause affecting an employee for more than two years after leaving is almost certain to fail.

The head of employment at Fox Williams, Jane Mann, says any such covenant must be restricted to people the employee has actually had contact with during their tenure. An attempt by a large agency to ban an ex-employee from hiring any staff or clients used by their former agency would be vulnerable to challenge, she says.

Yet while practitioners suspect some non-competes are unenforceable, Mann urges employees who feel like challenging them to exercise caution.

A determined employer with deep pockets could opt to launch an interim injunction against the employee while a full hearing is pending - perhaps as an example to other employees.

There are other practices at work. One global agency recently banned a former employee from mentioning that he had worked for them in any of his new start-up's publicity.

Burd says there is no shortage of clients with ambitions to have stringent non-compete clauses inserted into their employees' contracts. The key thing to bear in mind is that the more ambitious the clause, the less likely it is to be of any use in a legal dispute.

FOR EMPLOYERS

- Avoid 'one size fits all' restrictions. The question of the reasonableness of a contract relates to specific individuals rather than all ex-employees at a given level.

- Covenants steering ex-employees away from all clients and staff at an organisation tend to be too broad to be enforceable.

- Update the terms of contracts as staff are promoted. Some departing senior staff are still governed by contracts they signed as trainees.

- Don't be greedy in what you look for in restraints. Go for what's reasonable, and therefore enforceable.

- Lawyers say you should seek specialist advice before risking a legal battle, but then they would ...

FOR EMPLOYEES

- Be careful not to remove any confidential information from your employer's office - it is an offence and will seriously prejudice any case the company in question may have against you.

- Be aware that a draconian contract placed before you may not be enforceable.

- Where a covenant is excessively restrictive, sign it as quickly as possible as there is little hope of the conditions being enforced.

- Be aware that a determined employer can always apply for an injunction, putting you at a serious disadvantage if you are hoping to start a new business.

- Lawyers say you should seek specialist advice before risking a legal battle, but then they would ...

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