Restrictive covenants: can solicitors take clients to their new employer?
Employment solicitor, Nathalie Stewart, explains what restrictive covenants are and how they affect you whether you’re a solicitor, client or former employer.
What are restrictive covenants?
Restrictive covenants are common clauses found in employment contracts. They’re used where the departure of an employee could result in a financial loss to the employer, particularly if clients or other employees follow that employee to their new business.
Restrictive covenants for solicitors
A solicitor’s service relies on relationships built up with clients, sometimes over many years. These clients may have no real relationship with the law firm as opposed to the individual solicitor. If their solicitor leaves, it follows that the client may want to leave too, removing their fees as a source of income for the law firm.
If a solicitor leaves employment and has a restrictive covenant in place, does that stop them from taking their clients with them? If it can, then what about the clients who want to stay with their solicitor? For example, some clients may be in the middle of litigation or divorce proceedings. It’s understandable that they wouldn’t want to meet or instruct a new solicitor to deal with complex or personal matters for them. Also, any individual has the right to instruct a solicitor of their choice and a restrictive covenant stops this.
The courts have considered this point and rejected that solicitors could amount to a special case where restrictive covenants did not apply. Restrictive covenants are used in other areas of commerce and the courts refused to allow an exception to the legal profession.
What to do if you’re a solicitor or client
You should seek permission from the former employer to consent to the client transfer. This is particularly important if the former employer doesn’t have the skill or resources to deal with your case afterwards.
The former employer does have a big incentive to agree. If they refuse to allow the transfer, it could create a disgruntled relationship between the law firm and the client. This could lead to complaints and poor recommendations or publicity.
What to do if you’re the former employer
You should ensure the solicitor can’t solicit the client by having restrictive covenants in the employment contract. If it’s possible, you can also enforce a garden leave clause in the contract, so the solicitor is not working with the clients during the notice period. This gives the client a chance to form a relationship with a new solicitor.
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