Court upholds non-competition clause for lawyer joining Weightmans

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Ali: reasonable one-year restriction, judge says
Source: LinkedIn

The High Court has upheld a 12-month non-compete clause imposed by an employment law firm on a director joining national law firm Weightmans.

Jason Beer QC, sitting as Deputy High Court Judge, said the business plan drawn up by Saira Ali as part of Law by Design’s (LBD) departure process for Weightmans was ‘revealing’ of her intentions .

“Put simply, his plan was – unless the covenants were enforceable (and, I would add, enforced by this court), to move or move (‘transition’) clients from LBD to Weightmans.”

Ms Ali suggested to the court that Weightmans was more interested in her as a person than her business plan.

“But fine words don’t butter parsnips,” the judge said, rejecting her argument that the non-competition clause was too broad, lasted too long and was unenforceable. “I prefer to rely on what the business plan reveals about Ms. Ali’s intentions.”

He added that, being an employment lawyer herself, the lawyer fully understood the meaning and implications of the non-competition clause, which she had signed three months before resigning.

LBD was established in 2013 in Manchester by Sue Morrison, who brought Ms Ali with her from Hill Dickinson as associate director, along with four other colleagues.

In 2016, Ms. Ali signed a shareholders’ agreement establishing restrictive clauses in the event of departure, in return for a 3% stake in the company. Two years later, she became a director, the equivalent of a salaried partner.

In early 2021, following the departure of two lawyers, Ms Morrison raised Ms Ali’s salary from £70,000 to £92,000 in recognition of her increased responsibilities for LBD’s NHS clients – her main source of work – and to help secure his long-term commitment to the company.

This included signing a Services Agreement (SA) which included the 12-month covenants, which Ms Ali did despite doubts about their duration – a decision she told the court was “pragmatic”.

However, she resigned three months later. Her six-month notice was due to end on November 3, 2021, when she intended to join Weightmans immediately.

Ms. Ali provided Ms. Morison with written undertakings to abide by covenants relating to non-solicitation, non-trading, non-poaching of personnel, non-disparagement of personnel, and protection of LBD’s confidential information, but declined to do so with respect to non-competition.

Mr Beer said the business plan showed ‘in the clearest possible terms’ that Ms Ali intended to bring £252,000 from LBD’s business to Weightmans, almost all NHS work.

“It’s a substantial part of LBD’s turnover (more than a third). It is also very significantly more than Ms Ali had charged these clients in the year before the business plan was created” – some £137,000.

The lawyer ‘clearly considered it unlikely that she would ever be bound by the non-compete clause’, he added, although she admitted her client relationships all stemmed from Ms Morrison and LBD.

Mr Beer said: “Regardless of the significant range of confidential information requiring protection, in my view LBD was entitled to seek to protect the client relationships established by LBD employees providing legal services to clients of the NHS.”

The way the SA was drafted meant that it was “a straightforward conclusion to get this clause to extend no further than was reasonably necessary” for the protection of the interests commercial LBD.

“The critical fulcrum around which the clause revolves is the definition of ‘restricted activity’ – this limits the operation of the clause to those parts of LBD in which Ms Ali was involved to a significant extent in the vicinity of her departure from the company.

“This arrangement ensures that the undertaking is reasonable within the scope of its operation: (i) if Ms. Ali has not been involved in parts of LBD to a material extent, then the undertaking is not operational with respect to to these parties; (ii) if Ms Ali was involved in such parts of the business to a significant extent, then the engagement bites – but that is because it is reasonable to prevent her from joining a business that competes with these parts of LBD’s business.

Moreover, 12 months was “a reasonable period” for it to last; Mrs. Ali had suggested six months. One year was “reasonably necessary to find, successfully recruit and then train/integrate a lawyer in a small firm like LBD”.

Ms Ali accepted in evidence that six months would be “nowhere near enough for all of this to happen”.

Mr Beer added that a year was also “the length of time confidential information is kept and Ms Ali’s ability to remember it”.

He also pointed out that the SA allowed Ms Ali to join a business anywhere in England and Wales that did not compete with LBD for NHS customers in the North West or part of Hertfordshire.

“Overall, as it seemed to me, the effect of Ms Ali’s position in this application – and her opposition to the injunction application – was to ask the court to release her from a contractual restraint so that she could be free to take up employment with the very type of competitor in respect of whom the restriction was intended to apply”.

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