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The importance of having a well drafted non-compete clause

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The importance of having a well drafted non-compete clause

In Law by Design v Ali the High Court has stopped a solicitor, Ms Ali, from going to work for a competitor of Law By Design, the national firm Weightmans, for the 12 month restrictive period set out in her service agreement.

In this article, Employment Partner Paul Burton takes a look of this decision and discusses the importance of having a well drafted non-compete clause/restrictive covenant.

What happened in Law by Design v Ali?

Ms Ali had worked for Law by Design since 2013, when the niche employment law firm was set up.

She was successful and, when two other lawyers left in early 2021, her pay was substantially increased, and she was asked to sign a new service agreement. That agreement included a 12-month restrictive covenant, which Ms Ali agreed to sign.

She told the court that she had misgivings over doing this but made the “pragmatic” decision to sign the agreement to obtain the increase in pay.

Relationship breakdown and resignation

Unfortunately, the relationship between Ms Ali and the firm soured and she resigned only three months after signing the new service agreement. 

She wanted to join Weightmans immediately after her six month notice period ended in November 2021. 

Breach of the restrictive covenant

Ms Ali provided Law by Design undertakings that she would comply with most of the restrictive covenants, but not the non-competition one, stopping her from going to work for a competitor for 12 months.

Where Ms Ali went particularly wrong was to produce a business plan that clearly showed she was going to bring over £250k of work over from Law by Design to Weightmans.

This was over a third of Law by Design’s turnover. They applied for an injunction to stop Ms Ali.

What did the court decide?

The Court decided that Law by Design had a legitimate business interest to protect and that Ms Ali was clearly going to cause them harm by breaching the non-competition restrictive covenant.

The clause had been well drafted and was no wider than was reasonably necessary to protect the business interest. 

What is a reasonable non-compete restriction period?

The court also decided that 12 months was a reasonable period for the restrictive covenant to last, Ms Ali having argued that six months would be sufficient. 

In the climate at the time, it would reasonably take Law by Design a year to successfully recruit and train up a new lawyer to the same standard as Ms Ali, particularly as they were a small firm.

A specialist Employment Solicitor’s view

Employment Partner Paul Burton says: “This case demonstrates that well drafted non-competition restrictive covenants can be enforceable, even if they last as long as 12 months. 

This is particularly the case when, as here, the outgoing employee has acted in what can be viewed as an underhand way and is going to potentially cause a significant loss to the employer they are leaving.”

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