The new year brings new ideas and with that new businesses are born. Given the year we have all just experienced it’s no wonder people are reflecting and considering that leap into their own business.
We speak to many people who want to start out in business. Usually, a lot of them are still employed and looking to start up their business whilst working. It’s a sensible idea to maintain that safety net that an employed position offers whilst your dip your toes into the self-employed arena. However, some people aren’t aware that their employment contracts can sometimes prevent this.
If you’re considering a new business then have a read of our blog all about start-ups and your obligations https://kkbservices.com/start-ups-obligations/.
Your Contract of Employment
Whether you are entitled to “moonlight” or set-up business whilst still employed is always a difficult one. Many people struggle between telling their employer or keeping quiet. Strictly speaking, doing the latter could put you in breach of your contract of employment. There are many reasons why you may be reluctant to tell your employer. You may think that it could jeopardise your position. Or, that your employer may treat you differently if they know you are considering a different path. Breach of contract may not be one of the reasons you have thought of for not telling your employer. Nonetheless it’s important to check your employment contract to see exactly what it says.
There may be a clause in your contract which requires you to declare “other work”. If your business is in competition with your employer’s then you may have non-compete clauses in your contract. You could run into difficulties if your contract of employment does contain either or both of these clauses and you do not tell your employer but they subsequently find out.
There’s also the moral dilemma to consider and whether you feel comfortable keeping it from your employer. This will obviously depend on each individual case and a number of different factors. Most employers expect loyalty, honesty and commitment from their employees. But, as mentioned, this will depend on individual circumstances and some of the following scenarios:
- are you are going to be setting up your business in the same industry?
- you may be using your employer’s equipment to work on your side business;
- are you working on your side business in your employer’s time?
- you’re using the employer’s client information for your side business.
The Law
What does the law say about it? Non-compete clauses at present do have a place and can be enforceable. But that isn’t to say that they will be fair. If they aren’t fair you might be able to argue this point.
Non-compete clauses are just one type of post termination restriction that your employer can write into your employment contract.
If you are still reading you might be asking why we are bringing this up now. Well, it’s because finally, there’s some movement on this. We aren’t grateful to Covid for many things, but this is one of the positives that has come from it. The government has recognised that the labour market requires a much-needed boost. Not only to increase innovation but also competition to create new jobs.
Great News for Business
The Department for Business, Energy and Industrial Strategy (BEIS) considers that non-compete clauses “can act as a barrier by preventing individuals from working for a competing business, or from applying their entrepreneurial spirit to establish a competing business”.
The government has now launched a consultation to consider this more fully. The proposal includes “making such terms enforceable only if employers pay individuals for the period of restriction or, alternatively, prohibiting the use of such clauses altogether.”
We are likely to hear more on this next year. BEIS is focusing specifically on non-compete clauses. However, the consultation paper will also investigate whether similar reform should be applied to other types of post termination restrictions. These include non-solicitation, non-dealing and non-poaching clauses.
Whilst we are a long way off the changes being implemented, or indeed agreed, it could be good news for future small business owners. As and when new information becomes available, we will keep you updated.
In the meantime, if you are looking at starting out and not sure about whether your contract of employment allows it then why not drop us a message and we’d be happy to guide you.
Perhaps you’re already in the throes of setting up but have hit a brick wall on pricing. Kirsty wrote a really informative blog on this very subject so please have a read if this is something you’re stuck on https://kkbservices.com/pricing/