Guernsey and Jersey Employment: Post Termination Restrictions and What New Employers Should Consider When Bringing in New Talent

One of the buzz phrases of the moment is the “war for talent”. Businesses in the Channel Islands are trying to attract and retain the best employees. It is clear is that there is an increasingly competitive labour market in Guernsey and Jersey and this is aggravated by a small employee pool in the islands economies, and the restrictions on bringing in employees from off island. This does mean that businesses are at increased risk of losing key employees to their competitors.

Over the last year we seen an increase in the number of businesses looking to enforce post-termination restrictions and we have acted on both sides, including acting for new employers. We have also been instructed by a number of employers looking to review and revise their post-termination restrictions now, in order to ensure that they are in the best position to seek to rely on those covenants should they have to.

We have previously written articles focussed on what current employers need to consider when drafting and enforcing post-termination restrictions.

The focus of this article is on what new employers need to consider when bringing in new employees.

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Inducing a breach of Contract

The primary claim a new employer can face is that they have induced the new employee to breach their contract of employment with their former employer. In order to be liable:

  • there needs to be a binding and valid contract, including enforceable post-termination restrictions;
  • the new employer must know that they are inducing a breach of contract;
  • a conscious or deliberate decision not to inquire into the existence of post-termination restrictions is in many cases treated as equivalent to knowledge of the existence of those restrictions. So the new employer cannot simply turn a blind eye. This is particularly the case in industries where post-termination restrictions are common;
In the English case of David Allen (t/a David Allen Chartered Accountants) v Dodd & Co Ltd [2020] EWCA Civ 258, which is persuasive in both Guernsey and Jersey, the English Court of Appeal considered an inducement claim and the extent of the new employer’s knowledge about whether they were inducing a breach of contract. The new employer, Dodd, had obtained advice from a lawyer, which said that the employee’s post-termination restrictions were unlikely to be enforceable. Dodd relied on this advice and after starting work for them Mr Pollock, the new employee, immediately started contacting clients from his old employer David Allen. Both the High Court and the Court of Appeal subsequently held that contrary to this advice the restrictions were valid and enforceable and Mr Pollock was held to have breached these covenants.

David Allen also claimed against Dodd and argued that as the legal advice had been incorrect, Dodd could not rely on it and that they had induced the breach of contract by Mr Pollock.

The Court of Appeal rejected this claim and concluded that people should be able to act on reasonable legal advice, even if that advice turns out to be wrong. They commented that legal advice is rarely expressed in categorical terms – the fact that the advice was the covenants were unlikely to be valid was sufficient.

The upshot is that if a new employer honestly believes, based on legal advice, that the post-termination restrictions are not valid, it does not matter that their belief was mistaken or wrong.

Steps the New Employer Should Take

Post-termination restrictions are incredibly common in employment contracts for financial services businesses in Guernsey and Jersey. We routinely see non-solicit and non-dealing covenants, and in appropriate cases we also see non-compete covenants. It is also common for the employee to be under an express obligation to provide this to the new employer – as this allows the previous employer to argue that the new employer knows or ought to have known about the post-termination restrictions. It is therefore likely that new employers cannot simply turn a blind eye to their new employee’s post-termination restrictions.

We recommend that the new employer requests and obtains a copy of the employee’s post-termination restrictions from their previous employer. In light of Dodd, we also recommend that the new employer obtains external legal advice on validity of the post-termination restrictions. This is an incredibly important step in protecting the business from the risk of an inducement claim. Provided this advice is reasonable, the new employer can rely on it and is highly unlikely to face a successful inducement claim.

This advice will also allow the new employer to plan for the employee’s start, and to put in place appropriate measures to ensure that any potentially valid covenants are not breached.

After employment has started the new employer should also provide clear guidance to the employee on what they can and cannot do in order to avoid a breach of the post-termination restrictions. We recommend that this is documented, and that the new employer keeps this under review for the duration of the post-termination restrictions.

Sarah AshGroup Partner*T +44 (0) 1481 748
Victoria PrattSenior CounselT +44 (0)1481 748

Daniel ReadPartnerT +44 (0) 1534 700
Jenny BruntonAssociateT +44 (0) 1534 700