# Non compete agreement - is this legal?



## onekeano (15 Jun 2006)

I know of a person who applied for a job with a company and was told by the hiring company that they had an agreement with the current employer not to hire from one another.

Is this illegal? I would have thought it was anti competitive and restricts the "free movement of labour"?

Anyone got any experience in this area?

Roy


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## SineWave (15 Jun 2006)

I know of one type of industry in a certain geographic location which has flagged that line to all their employment agencies.

They have a vested interest in keeping salaries at a certain (questionable?) level, by supply then being greater than demand, even though they are competitors on product.


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## onekeano (15 Jun 2006)

SineWave said:
			
		

> I know of one type of industry in a certain geographic location which has flagged that line to all their employment agencies.
> 
> They have a vested interest in keeping salaries at a certain (questionable?) level, by supply then being greater than demand, even though they are competitors on product.



Hi Sinewave, I'm not a legal person but I would have thought that that is a restrictive practice and could be challenged in a court of law - basically it means restraining the movement of people?

Roy


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## SineWave (15 Jun 2006)

I would also have imagined it as being illegal, but it has only been quoted to me verbally, but on many occassions, as a matter of fact. Hence no proof.

There is also the non-competitor clause which everyone signs on joining any of these companies, but there are two chances of that being followed up in reality.


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## RainyDay (18 Jun 2006)

Give The Competition Authority a call.


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## CARROW (25 May 2007)

My company are in process of making me redundant. They are offering a redundancy package above the statuatory entitlement. However they are stipulating that a non-compete agreement must be signed in order to get it, if it is not signed they are saying they will only give statuatory redundancy. The agreement is specifying we cannot come back to their customer's site for 6 months. Is this legal ?


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## ClubMan (25 May 2007)

I sought independent legal advice on a fairly standard non-compete clause in a new contract (takeover situation) in the early 90s and my solicitor told me that such clauses were generally not enforceable in _Ireland/EU_. You cannot be prevented from earning a living under such a clause. Obviously a situation in which you steal or reuse intellectual property (e.g. designs, source code, customer contact lists etc.) belonging to the original company would be a separate matter but just working for a competitor cannot be prevented in general as far as I know. I tend to just sign these contracts nowadays and not worry about the non compete clauses. But if in doubt get your own independent, professional, legal advice.


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## leafs (25 May 2007)

Conrad Black has experience of this!


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## ClubMan (25 May 2007)

leafs said:


> Conrad Black has experience of this!


In a different jurisdiction so perhaps not relevant here?

Just noticed that the original query is actually about non solicitation rather than non compete clauses. I think that such clauses may be enforceable even if non compete clauses may not be. But non solicitation clauses are easily circumvented by having the potential hire initiate contact with the potential hirer at arm's length.


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## CARROW (25 May 2007)

I have contacted the competition authority to clarify if this would be in breach of the competition act. Hopefully thay can clarify. Think the bes t thing to do is just sign and if it becomes a road block later to other things maybe fight it then. If I needed advice can anyone recommend someone ?


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## Askar (25 May 2007)

There is a question mark over whether an employee is an 'undertaking' under the competition act i.e. whether (s)he can rely on the provisions of Act. The Authority, in their profound wisdom, have takent the view that such agreements do fall within the legislation (albeit the since repealed 1992 Act). AFAIK they have also taken the view that such restrictions are legitimate on the basis that they serve to protect the goodwill of the business. however, the length of such restrictions appears to be limited to 1/2 years.


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## ClubMan (25 May 2007)

That's interesting. My solicitor told me that one's constitutional right to earn a livelyhood would override any contractual non compete clause which seems to make sense. Once again this would not permit an ex-employee from transferring intellectual property of the original employer to the new one though.


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## Askar (26 May 2007)

Clubman,

I think the advice you recieved was unusual. Non-compete provisions have their origin/legitimacy in the old common law restraint of trade caselaw. A somewhat obscure decision of the Supreme Court in Sibra ( [1998] 2 IR 589) did not afaik propose that constitutional right to earn ones livelihood overrode the ability of someone to protect ones business goodwill. Indeed, if you think about it the non-compete provision is arguably a corrollary to the right to earn one's livelihood - from the employer's perspective. If I spend my days and nights building up my business and getting a reputation for my business, employ some person and give them access to commercially sensitive matters, why should I not be able to protect my business goodwill? Basically, I think it is a case by case analysis to determine whether the restriction is fair and reasonable balancing all interests. I do not think that such restrictions are presumptively illegal.


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