Team moves & restraints
You may be thinking of leaving your current firm to join a competitor, or to set up your own competing business. This could involve just you, or may also include one or more colleagues.
This is a situation in which it is essential to take expert legal advice, preferably at the outset.
As a partner or LLP member, you will have current duties to your current firm, some of which will be expressly set out in the partnership orLLP agreement and others of which will be implied. Even after your current appointment has ended, there may well be post-termination restrictions in the agreement which could be used to prevent you from competing or from approaching or dealing with clients or customers for specified periods of time. You should not assume (as some people have been known to do to their cost) that these post-termination restrictions are never enforceable.
In team move situations, firms often assert that there has been unlawful collusion between team members and that losses (and therefore claims for damages) are greater where the departing team is effectively irreplaceable, whereas the departure of just one or two employees would not have that that impact. It is therefore very important to take expert advice if a team move is proposed, to ensure that you do not expose yourselves to unnecessary risks.
Firms are potentially entitled to enforce post-termination restraints to the extent that they go no further than is reasonable to protect their legitimate interests. Particularly in relation to genuine equity partners (or their LLP equivalents) such restraints can be easier to enforce than in mere employment cases. But identifying those legitimate interests and assessing whether any restraints go further than is reasonable to protect them is a complex business demanding specialist expertise.
This is a difficult area of employment law and the stakes are often high. Our work for executives in this area includes:
- At the recruitment stage, reviewing contractual restrictions, garden leave clauses and related incentive and termination clauses in contracts of employment;
- Advising on strategy and preparations for a move (on an individual or team basis) including practical ways of avoiding being in breach of duties to the current employer, including any express or implied fiduciary duties and duties of fidelity;
- Advising on terminating the existing contract(s) of employment and on garden leave and other potential termination-related issues;
- Advising on the enforceability (or otherwise) of post-termination restrictions
- Advising on strategy to deal with post-termination restrictions
- Assisting with negotiation concerning post-termination restrictions
- Defending executives against legal proceedings seeking to enforce restrictions, garden leave clauses, fiduciary and other obligations.